–Financial Ratios + Credit Analysis + Z-Score

The focus of this module is on the following items.
a) compute financial statement ratios,
b) analyze trends of a company,
c) credit analysis, and
d) figure out if a company is likely to go bankrupt soon (using Z-scores).

2) This type of financial analysis is done by “credit analysts,” “management consultants,” and “business loan analysts.”

3) Refer to the following material on BB.
a) Lecture note “Financial Statement Analysis Tools Lecture Note." + Support Videos
b) Excel templates in a zip file "Student Excel Templates."

4) Homework 5 instructions based on Financial Statement Analysis (Ratio Analysis, Credit Analysis, Z-score) are provided as a PDF document.

Amy’s grandparents have been depositing $500 into a savings account every month since she is born. The
1st payment was made the day Amy was born. The account pays 6% interest annually. Immediately after
Amy’s grandparents make the monthly deposit on her 18th birthday, Amy went to the bank to check her
bank balance.
What should be Amy’s bank balance?
2. John is planning to buy a house in three years. He thinks he needs to put down $65,000 in three years as a
down payment. Currently John has $15,000. He would like to start saving in a bank that offers 8% annual
interest rate.
How much should John save every month into that bank account so that he can accomplish his goal?
3. Juan has just won a lottery. He can get $13 million now (after-tax, lumpsum or one-time option), or he can
get $1 million annually for 25 years starting today (after-tax, 25 payments of $1 million each). In both
options, he can save his money at a local bank, which is offering a 7% per year return on deposits. Juan is
not sure if he should pick a lumpsum option or 25-payments option. He comes to you for help.
What is the benefit (or loss) of choosing the lumpsum option in today’s dollars?
4. Exactly six years ago, Cathy bought her dream home using a 30-year mortgage with an APR of 6.5% on a
$500,000 loan. She has been making her monthly payments. Today, she came to know that her bank is
offering a special mortgage refinance offer at an APR of 4.25% on 20-year mortgages.
How much will Cathy’s monthly payment change, if she decides to refinance today?
5. Makayla is 35 years old today, and she has decided it is time to plan seriously for her retirement. Makayla
wants to save $10,000 per year for her retirement starting next year. She expects her salary to increase each
year so that she will be able to increase her savings by 4.0% per year. Makayla can earn 8% per year on her
retirement savings account.
In today’s dollars, how much will Makayla have saved at age 65 (on the day of her retirement)?
Five problems
4
• Upload files to Blackboard under the section “Homework”
1. Upload Excel file (TVM Homework_Student Template_BB.xlsm) (20 points).
2. Upload 1 short video (five to ten minutes long) describing how the
model is built demonstrating step-by-step (20 points).
3. Answer questions at the URL (20 points): https://bit.ly/3t5ZMd4

You will need to answer these questions from this link which is 20 points

Due date is 8/8 6:45 PST