MN-M024: You are required to build models in an Excel worksheet: Financial Modelling Coursework, SU, UK

Subject MN-M024: Financial Modelling

General requirement and description:

This assignment consists of two parts. In Part A, you are required to build models in an Excel worksheet, whereas in Part B, you are required to write a report based on Part A to explain source of information, modelling method and calculation of results.

The total word count of the report, excluding tables and references, should be no more than 3,750 words. A word count must be provided on the cover page.

Part A – Creating the Excel workbook

A.1 – Financial statement analysis

You are an analyst at the corporate banking department of a consulting firm. You are required to build a valuation forecast model and arrive at a valuation calculation for one of following four companies: Persimmon plc, BAE System plc, Tesco plc, NEXT plc.

The data Collect all data required from internet and company’s annual reports.

Tasks In Excel worksheet, complete the following tasks:

a) Clearly indicate your assumptions of Capex for fade period.
b) Complete an income statement forecasting model.
c) Complete a balance sheet forecasting model.
d) Complete a cash flow statement forecasting model.
e) Calculate key ratios, WACC.
f) Perform cash flow valuation.
g) Perform sensitivity analysis.

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A.2 – Modelling the yield curve

You are a corporate finance analyst in an investment bank. One of the bank’s clients is interested in raising $5m of debt financing through the issue of a bond. The bond would have a face value of $1000, a maturity of 15 years, and a coupon rate of 5.5%.

The company has a credit rating of A. Your manager wants you to estimate the
number of bonds that the company would have to issue in order to fulfil the financing requirement.

The data

The data file contains details on all A-rated bonds issued by US companies, except for those with very short maturity.

Tasks In Excel worksheet, complete the following tasks: Assume that the current date is 4 Oct 2014.
h) Plot and estimate a third order polynomial trend for the YTM.
i) Use the estimated yield curve to estimate the YTM that the new bond would
have.
j) Use the estimated YTM to compute the fair price of the bond.
k) Calculate the number of bonds that the firm would have to issue to raise $5m.

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