Copy & Paste the following sections within your paper and make sure to provide a discussion on each section using the bold portions as your Paragraph Subject/Topic Headings: (Please use and follow the order and following format):
Section 1: Overview:
Section 2: Financial History:
Section 3: Capital Structure:
Section 4: Valuation:
You may offer a very brief conclusion if you wish but make sure to provide the required 3 citations at a minimum. Again, the Final Project should be between 6–9 pages in length, double spaced, with 12-point Times New Roman font, one-inch margins, and APA formatting. Along with your corporate valuation report, you will submit your complete Excel template as a separate file. (Please remember NOT to use INVESTOPEDIA OR WIKIPEDIA as a resource). Please let me know if you have any questions.
FIN 330 Final Project I Guidelines and Rubric
Overview Corporate financial managers must have a business-wide perspective to successfully navigate the corporate environment. The skills you will develop in this course will support you in your future business career and set the foundation for the concepts that will be covered in the next course, Multinational Corporate Finance. Your final project for FIN 330 will allow you to showcase your mastery of the varied skills a finance professional must obtain: It will require you to analyze a real-world corporation from a quantitative perspective while also investigating the challenges and decisions a manager must face. To accomplish this, your final assessment will be broken up into two separate but related projects. For your first project,, a corporate valuation report, you will choose one of the U.S. corporations from the provided list, analyze the historical financials of your chosen corporation using the provided Excel template, and estimate the value of your corporation in a brief report. The second final project is a risk management and ethical analysis that will focus on the same corporation, highlighting the management and leadership considerations and decisions required of top-level financial managers. In this written report, you will discuss ethics, corporate social responsibility, and the challenges related to attaining short-term and long-term goals. Combined, these two projects will assess your knowledge regarding the quantitative and qualitative concepts of corporate finance and leadership. The first final project is divided into two milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules Two and Five. The final corporate valuation report is due in Module Seven, and the final risk management and ethical analysis is due in Module Eight. In this assignment, you will demonstrate your mastery of the following course outcomes:
Estimate the value of corporations based on quantitative and qualitative analysis of financial history, industry trends, and projections of future performance
Analyze the relationships between capital structure, risk, and cost of capital for informing financial decisions that can optimize the value of corporations
Analyze challenges financial managers face regarding short-term and long-term planning for informing decision making
Prompt Your corporate valuation report should analyze your chosen corporation from the provided list and estimate its overall value. Throughout this assignment, you will use a provided Excel template. To complete this assignment, you will submit both a written paper and the completed Excel template with the “Financial History,” “Capital Structure,” and “Valuation” tabs filled in.
Specifically, the following critical elements must be addressed:
I. Overview: This section of your report will be devoted to providing a thorough overview of the background of the corporation you selected and setting the foundation for your later discussion of the challenges financial managers face. Specifically, you must address the following:
A. Describe the market to which your corporation belongs, identifying the products or services your corporation sells and the share of the market it has.
B. Describe the customer base of your corporation and the top competitors for this customer base. Be sure to consider what motivates the customers and the challenges the organization faces in retaining the customer base.
C. Describe the key inputs (and sources of those inputs) used to create the products or services, as well as the key resources for corporate operation (such as staff, facilities, technologies, etc.) and the extent to which attaining all these resources presents a challenge to the particular organization.
D. Analyze key market trends and issues within the industry for potential risks to the organization.
II. Financial History: The next section of your report should focus on the financial history and capital structure of your organization. A. Quantitatively analyze three years’ worth of the corporation’s finances using the provided Excel template. You will submit this template along
with your report, and may embed pieces of the Excel template into your report to show key financial highlights in the following critical element. B. Summarize the financial highlights you determined from the analysis in the Excel template, explaining the significance of the key ratios for the
overall financial health of the organization.
III. Capital Structure: In the third section of your report, discuss the capital structure of the corporation. A. Outline the most recent year’s debt, equity, and total capital using the provided template to show the overall capital structure of the
corporation. B. Articulate the corporation’s dividend policy and what impact it has on the investors. C. Analyze the relationship between capital structure, cost of capital, and risk, using examples from your chosen organization. D. Explain how the relationship between capital structure, cost of capital, and risk can help inform decision making and maximize corporate value.
IV. Valuation: The final section of your report will focus on calculating current value, outlining assumptions, and estimating the future value of the
corporation through forecasting the cash flows. Specifically, respond to the following: A. Calculate the current market value of equity for your corporation, using the three-year history and provided Excel template, and explain what it
means for the corporation. B. Outline any assumptions you have made in calculating the current value and estimating the future value of the corporation, explaining why you
made them and why they are important. (Hint: Assumptions can include growth rates, margins, trends, etc.) C. Estimate the current value of your corporation by forecasting the cash flows over five years using the provided Excel template, and explain your
findings. Calculate EVA, NPV, IRR and MIRR.
Milestones Milestone One: Overview and Financial History In Module Two, you will submit Milestone One, which provides you an opportunity to work on the overview and financial history sections of your Final Project I: Corporate Valuation. As part of this assignment, you will also complete specific elements of the provided excel template. This milestone will be graded with the Final Project I Milestone One Rubric. Milestone Two: Capital Structure and Valuation In Module Five, you will submit Milestone Two, which provides you an opportunity to work on the capital structure and valuation sections of your Final Project I: Corporate Valuation. As part of this assignment, you will also complete specific elements of the provided excel template. This milestone will be graded with the Final Project I Milestone Two Rubric. Final Submission: Corporate Valuation Report In Module Seven, you will submit your Final Project I: Corporate Valuation Report. It should be a complete, polished artifact containing all of the critical elements of the final product. It should reflect the incorporation of feedback gained throughout the course on your milestone assignments. This submission will be graded with the Final Project I Rubric.
Final Project I Rubric Guidelines for Submission: Your corporate valuation report should be 6–9 pages in length, double spaced, with 12-point Times New Roman font, one-inch margins, and APA formatting. Along with your corporate valuation report, you will submit your complete Excel template as a separate file. You may use pieces of your Excel template as images within your report, but you must still submit the completed Excel template with your final report submission.
Critical Elements Exemplary Proficient Needs Improvement Not Evident Value Overview: Market
Meets “Proficient” criteria, and description demonstrates deep insight into the corporation’s place in the market (100%)
Accurately describes the market, products or services, and portion of the market held by the chosen corporation (85%)
Describes the market, products or services, and portion of the market held by the chosen corporation, but lacks accuracy or necessary detail (55%)
Does not describe the market, products or services, and portion of the market held by the chosen corporation (0%)
Meets “Proficient” criteria and makes cogent connections between customer base and competitors (100%)
Accurately describes the customer base and the corporation’s top competitors for those customers (85%)
Describes the customer base and the corporation’s top competitors for those customers, but lacks accuracy or detail (55%)
Does not describe the customer base and the corporation’s top competitors (0%)
Meets “Proficient” criteria and shows keen insight into the varied resources required for corporate operation (100%)
Accurately describes the key inputs and resources the corporation needs (85%)
Describes the key inputs and resources the corporation needs but lacks accuracy or detail (55%)
Does not describe inputs and resources the corporation needs (0%)
Meets “Proficient” criteria and shows keen insight into corporate risks associated with market-wide trends and issues (100%)
Critically analyzes the market for key trends and issues that may pose risks for the corporation (85%)
Analyzes the market for key trends and issues but lacks detail, logic, or focus on issues that may pose risks for the corporation (55%)
Does not analyze the market for trends and issues (0%)
Financial History: Excel
Correctly analyzes three years of corporate financial statements using the provided Excel template (100%)
Analyzes three years of corporate financial statements using the provided Excel template, but analysis contains miscalculations or is incomplete (55%)
Does not analyze three years of corporate financial statements using the provided Excel template (0%)
Financial History: Highlights
Meets “Proficient” criteria and shows keen insight into the significance of specific financial calculations for determining financial health (100%)
Accurately summarizes the financial highlights determined from the Excel analysis of the corporate financial statements, citing key ratios that give a picture of the overall financial health (85%)
Summarizes the financial highlights determined from the Excel analysis of the corporate financial statements but lacks accuracy or details regarding key ratios that give a picture of the overall financial health (55%)
Does not summarize the financial highlights determined from the Excel analysis (0%)
Capital Structure: Overall
Meets “Proficient” criteria, and outline shows mastery of determining a corporation’s capital structure from financials (100%)
Accurately outlines the most recent year’s debt, equity, and total capital using the provided template to show the overall capital structure of the corporation (85%)
Outlines the most recent year’s debt, equity, and total capital using the provided template, but with gaps in accuracy (55%)
Does not outline the most recent year’s debt, equity, and total capital using the provided template (0%)
Capital Structure: Dividend Policy
Meets “Proficient” criteria and makes cogent connections between dividend policy and investor impact (100%)
Accurately articulates the corporation’s dividend policy and the impact it has on investors (85%)
Articulates the corporation’s dividend policy and its impact on investors, but does so inaccurately or with gaps in details (55%)
Does not articulate the corporation’s dividend policy and its impact on investors (0%)
Capital Structure: Relationship
Meets “Proficient” criteria and makes cogent connections between capital structure, cost of capital, and corporate risk (100%)
Accurately analyzes the relationship between capital structure, cost of capital, and risk, using examples to highlight claims (85%)
Analyzes the relationship between capital structure, cost of capital, and risk, but lacks accuracy or does not use examples that highlight claims (55%)
Does not analyze the relationship between capital structure, cost of capital, and risk (0%)
Capital Structure: Maximize Value
Meets “Proficient” criteria and shows keen insight into using knowledge of the relationship between cost of capital, capital structure, and risk to maximize corporate value (100%)
Accurately explains how the relationship between capital structure, cost of capital, and risk should inform corporate decision making and maximize corporate value (85%)
Explains how the relationship between capital structure, cost of capital, and risk should inform corporate decision making and maximize corporate value, but lacks accuracy or necessary detail (55%)
Does not explain how the relationship between capital structure, cost of capital, and risk should inform corporate decision making and maximize corporate value (0%)
Valuation: Current Value
Meets “Proficient” criteria and shows mastery of determining current corporate market value (100%)
Accurately calculates the current market value of the chosen corporation using the three-year history and provided Excel template, explaining findings in the report (85%)
Calculates the current market value of the chosen corporation using the three- year history and provided Excel template, explaining findings in the report, but lacks accuracy in calculations or lacks detail in explanation of findings (55%)
Does not calculate the current market value of the corporation or does not explain findings in the report (0%)
Meets “Proficient” criteria and shows keen insight into the role of assumptions in corporate valuation (100%)
Clearly outlines reasonable assumptions, explaining why the assumptions were made and why they matter (85%)
Outlines assumptions, explaining why the assumptions were made and why they matter, but with gaps in clarity or reason (55%)
Does not outline assumptions or explain why they were made and why they matter (0%)
Meets “Proficient” criteria and shows advanced grasp of future valuation (100%)
Logically estimates the current value of the corporation through five-year cash flow forecasting using the provided Excel template (85%)
Estimates the current value of the corporation through five- year cash flow forecasting using the provided Excel template, but with gaps in logic or accuracy of calculations (55%)
Does not estimate the current value of the corporation through five-year cash-flow forecasting using the Excel template (0%)
Articulation of Response
Submission is free of errors related to citations, grammar, spelling, syntax, and organization and is presented in a professional and easy-to- read format (100%)
Submission has no major errors related to citations, grammar, spelling, syntax, or organization (85%)
Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas (55%)
Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas (0%)
2-1 Final Project I Milestone One
September 25, 2021
Southwest Airlines (LUV) was introduced to Texans in 1967 due to strict air regulations.
Southwest Airlines offers a wide range different fare rates for customers that’s looking for a
quick getaway to a customer that is flying to meet a client for work. “Southwest aims to provide
affordable domestic and short-haul international are travel to consumers and corporate
customers, as well as providing reliable cargo and shipping services”(Satair,n.d.). They also
partnered with Chase Bank to form multiple credit cards that will suit every customer needs
along with perks for the different credit cards they offer. All Southwest credit cards (Personal
and Business) offers cash back and anniversary points loaded to their account. Southwest has
also made it very easy for consumers to book their flight on their mobile app that capable with
Apple and Android devices. The company is always expanding their technology advancement
within their mobile application to make it easier for all ages to navigate. Even though the
pandemic did hit the economy hard, Southwest did not lay off any of their workers. “In the fiscal
year of 2020, Southwest Airlines generated over 9 billion U.S. dollars in revenue. The airline
saw incremental increases since 2010, before declining severely in 2020” (Salas,n.d.). In the
domestic market share, Southwest Airlines came in really high in 2020 with a 17.4 percent
I(B): Customer Base
Southwest Airlines accommodate their flyers with 2 free check bags and having the
lowest prices more than their competitors. They advertise multiple sales on their flights to certain
cities on certain dates. “In its 51st year of service, Southwest Airlines Co. continues to
differentiate itself from other air carriers with exemplary Customer Service delivered by more
than 54,000 Employees to a Customer base that topped 130 million passengers in 2019.
Southwest has a robust network of point-to-point service with a strong presence across top
leisure and business markets. In peak travel seasons during 2019, Southwest operated more than
4,000 weekday departures among a network of 101 destinations in the United States and 10
additional countries” (n.d.,2021). The more discounts that Southwest is offering is attracting
more customers and future customers. COVID hasn’t stopped much traveling since a lot of
companies have figured out how to stay afloat while following CDC regulations. Southwest
hasn’t had much competition to beat their monthly deals, Spirit Airlines is the closest airlines
that offer affordable, but they do not offer free bag checks. No airlines have that type of deal for
their customers. This is one of the main reasons Southwest Airlines is one the most successful
airlines. Budget friendly fliers love the fact that they can find a bargain and enjoy an inexpensive
vacation with their free 2 bag check in. Long as their customers is wearing their mask and
Southwest flights have a high on time rate. A recent downside to flying is that Southwest airlines
did stop serving alcohol to their patrons for a few months until people understood to take
accountability for themselves. The pandemic has caused a lot of customers to get in a uproar
over the mask mandate while on the flight, which resulted to being fined $10,000 and a 10 year
no flight ban. Some people might not think that it’s a huge deal but traveling can be stressful
when you can’t utilize the airplane for 10 years and go into debt trying to pay the fine off. Rules
are now much stricter for all airlines and airports due to the FAA showing no more leniency on
I(C): Company Resources
“Southwest Airline’s key resources are its fleet of aircraft, its maintenance and service
infrastructure, its sales channels and IT infrastructure, its network of partnerships, and its
personnel” (Cleverism, 2017).
Southwest Airlines has a relationship with Boeing to only use their Boeing 737 Max 8
aircraft. That line of aircraft was introduced to Southwest customers in 2017 but unfortunately
that family of aircraft had some flight scares in 2020. So, Southwest took the proper measures to
ensure all their aircrafts were thoroughly mechanically checked and their pilots were properly
trained on how to operate that line of aircrafts. Due to their great diligent Southwest describes its
purposed philosophy of treating customers honestly and fairly, low fares staying low and ensure
every aircraft is well maintained before take-off.
I(D): Market Trends
Southwest grows with the technology trend and convenience for their customers. For
their customers, they even partnered with hotel brands, ride services and resorts to allow
customers gain points through their reward program. “They currently are the world’s biggest
airline by market value, that serves 102 destinations across the U.S., Mexico and Central
America” (Mazareanu, 2021). Southwest Airlines NYSE closed is at 52.85 on September
24,2021, which is not a bad closing week due to the COVID pandemic is still in the red zone.
Southwest is attracting new and current fliers to frequently fly to stay as the leading airline, so
they are having very low fares to grab a ticket. They company did see a major dip in revenue due
to the pandemic. There are also major risks that can happen in the airline industry. “Over the
course of the next 20 years, the global commercial aircraft fleet is expected to double to
approximately 45.000 aircraft, a growth particularly driven by increased air travel due to an
expanding middle class in emerging economies. Implementation of new programs and
technologies ties up significant capital” (Satair,n.d.). Please see the list below that is provided by
Satair of the top 10 risk in aviation industry:
“The top 10 risks in the aviation industry”
1. Volatility in the geopolitical and economic environment Managing the supply chain.
2. Managing the supply chain.
3. Competition in domestic and international markets.
4. Managing and retaining talent in the aviation industry.
5. Ability to perform in key contracts.
6. Compliance with a wide range of regulations and restrictions.
7. Incapacity to innovate.
8. Failure to realize the benefits of M&As and partnership.
9. Exposure to cybersecurity events.
10. Foreign currency and commodity price fluctuations.
II(A): “Please see Key Financial Information in the attached Excel Worksheet”
II(B): Financial Highlights
As we all know a lot of companies experienced a major revenue lost in 2020. On the
excel spreadsheet, it shows a significant lost when comparing the last three fiscal years.
Southwest and other airlines did suffer from a major lost due to low ticket sales. Southwest saw
the plunge in their revenue during the summer months due to a lot of the world was on lockdown
to minimize the spread of the COVID-19 virus. Summer is the season that all airlines rely on to
make their most revenue from due to schools are out and the everyday workers are taking time
off from work to vacation and spend time with their family.
Mazareanu, E. (2021, June 21). Topic: Southwest Airlines. Statista. Retrieved September 26,
2021, from https://www.statista.com/topics/3041/facts-and-figures-about-southwest-
Salas, E. B. (n.d.). The Statistics Portal. Statista. Retrieved September 25, 2021, from
Satair. (n.d.). The top 10 risks in the aviation industry in 2020 and beyond. Retrieved September
26, 2021, from https://blog.satair.com/ten-risk-in-aviation-industry.
Southwest Airlines. Cleverism. (2017, November 8). Retrieved September 26, 2021, from
5-1 Final Project I Milestone Two: Capital Structure and Valuation
Southern New Hampshire University
October 5, 2021
III (A): Capital Structure Overall
To get a better understanding of your corporation, such as Southwest Airlines, knowing
what their capital structure consist of is important. “Capital structure refers to the amount of debt
and/or equity employed by a firm to fund its operations and finance its assets. A firm’s capital
structure is typically expressed as a debt-to-equity or debt-to-capital ratio” (Capital Structure,
2020). Southwest Airlines debt was $2.737,000 and the equity was $19,856,000 to give them a
capital of $22,593,000. The equity was 87.9% and the debt is 12.1%, the capital must equal to
100%. A lot of Southwest Airlines shortcomings was due to the recent year of 2020 COVID-19
pandemic that halted a lot of flights due to surge in illness and deaths occurring around the
world. Despite the halt of flying in 2020, Southwest doesn’t hold a heavy debt load even though
their revenue shrunk.
III (B): Capital Structure: Dividend Policy
Southwest dividends have increased each year until the year 6/4/2019, which has been at
a halt at $0.18 for the last 2 years straight. Since Southwest Airlines does not have a heavy debt
hold, the stakeholders will still get paid.
III (C): Capital Structure Relationship
The capital structure is significantly made up of owner equity. The estimated cost of
equity for Southwest Airlines is 15.1%. In comparison, the cost of capital for “other” debt is
13.78% and leases is 12.1%. The WACC is 26.57% which is very close to the cost of equity.
Because of their leverage of debt in the capital structure, there is little risk of Southwest
defaulting on debt or lease payments. Southwest financial risk will continue to increase if their
structure increases. Long as Southwest is not declining in revenue and profits, they will be less
vulnerable to accumulating high risk for their stakeholder.
III (D): Capital Structure Maximize Value
If Southwest acquire an expansion to more city’s countries, which means they will be
taking on more debt due to that expansion, but it will be a positive look for investors to see more
revenue soon. This will be considered a maximize corporate value for the company. WACC is
important to look at because of the tax bracket is normally smaller than debt.
IV (A): Valuation Current Value
IV (B); Valuation Current Assumptions
Southwest will need to add more locations to gain more revenue and compete heavily with their
competitors on destinations. Recently in the new Southwest Airlines has a made high amount of
cancellation of flights due to a multiple of reasons, and of them being shortage of staff and
Other Financing Activities
Cash Flow from Financing Activities 9,658,000
Cumulative Translation Adjustment 8,515,000
NET CASH FLOW
Free Cash Flow (6,722,000)
VALUATION CALCULATIONS FREE CASH F
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