Assignment Instructions

BCO212 BUSINESS FINANCE I   Task brief & rubrics
Task: Final Assignment (40% of the total grade)
You are asked to answer all the questions in the proposed two cases.
This task assesses the following learning outcomes:

  • Understand the bonds and stocks valuation inside business enterprises.
  • Develop understanding of corresponding finance theories.
  • Improve analytical and quantitative skills.

LAUNCH: WEEK 10 / DELIVERY: WEEK 13 Latest MAY 10th, 2020, 23:59hrs ON MOODLE
Submission file format: Word document with all the answers, clearly identifying both cases separately.

9-10The student demonstrates an excellent understanding of the concepts.
8-8.9The student demonstrates a good understanding of the concepts.
7-7.9The student demonstrates a fair understanding of the concepts.
6-6.9The student demonstrates some, but insufficient understanding of the concepts.
3-5.9The student demonstrates insufficient understanding of the concepts. They may mention some relevant ideas or concepts, although it is clear that the relationship between them is not understood by the student.
1-2.9The student demonstrates insufficient understanding of the concepts and does not mention any relevant ideas or concepts.
0The student leaves the question blank or cheats.

Points are stated at the end of each question.
CASE 1 (65 points)
Ramirez S.L. was founded nine years ago by brother and sister Joan and Maribel Ramirez. The company manufactures and installs commercial heating, ventilation, and cooling units. Ramirez S.L. has experienced rapid growth because of a proprietary technology that increases the energy efficiency of its units. The company is equally owned by Joan and Maribel. The original partnership agreement between the siblings gave each 50,000 shares of stock. In the event either wished to sell stock, the shares first had to be offered to the other at a discounted price.
Although neither sibling wants to sell, they have decided they should value their holdings in the company. To get started, they have gathered the information about their main competitors in the table below.
Last year, Ramirez S.L. had an EPS of €3.15 and paid a dividend to Joan and Maribel of €45,000 each. The company also had a return on equity of 17 percent. The siblings believe that 14 percent is an appropriate required return for the company.

Ramirez S.L. Competitors
Arctic Cooling S.L.
National Heating & Cooling
Expert Ventilation S.L.
Industry Average


  1. What are the total earnings for the company? Hint: multiply EPS by number of shares outstanding. (5 points)
  2. What are the payout and retention ratios? (5 points)
  3. What is the growth rate? (5 points)
  4. What is the value per share of the company’s stock? Assume the company continues its current growth rate. (10 points)

To verify their calculations, Joan and Maribel have hired Marc Puig as a consultant. Marc was previously an equity analyst and covered this industry. Marc has examined the company’s financial statements, as well as examining its competitors’ financials. Although Ramirez S.L. currently has a technological advantage, his research indicates that other companies are investigating methods to improve efficiency. Given this, Marc believes that the company’s technological advantage will last only for the next five years. After that period, the company’s growth will likely slow to the industry growth average. Additionally, Marc believes that the required return used by the company is too high. He believes the industry average required return is more appropriate.

  1. What are the industry payout and retention ratios? (5 points)
  2. What is the industry growth rate? (5 points)
  3. What is your estimate of the stock price, based on Marc’s assumption regarding the growth rate? Hint: use non-constant growth model, implying that after the next five years the company’s growth rate will slow down to the industry growth rate. (15 points)
  4. Assume the company’s growth rate slows to the industry average in five years. What future return on equity does this imply, assuming a constant payout ratio? (5 points)

After discussing the stock value with Marc, Joan and Maribel agree that they would like to increase the value of the company stock. Like many small business owners, they want to retain control of the company, so they do not want to sell stock to outside investors. They also feel that the company’s debt is at a manageable level and do not want to borrow more money.

  1. How can they increase the price of the stock? (10 points)

CASE 2 (35 points)
Quick Air S.L. was founded 10 years ago by friends Peter Smith and Javier Benet. The company has manufactured and sold light airplanes over this period, and the company’s products have received high reviews for safety and reliability. The company has a niche market in that it sells primarily to individuals who own and fly their own airplanes. Peter and Javier have decided to expand their operations. They instructed their newly hired financial analyst, Laura Sanchez, to enlist an underwriter to help sell $35 million in new 10-year bonds to finance construction. Laura has entered into discussions with Sandra Harper, an underwriter from the firm of Castle & Partners, about which bond features Quick Air should consider and what coupon rate the issue will likely have.
Although Laura is aware of the bond features, she is uncertain about the costs and benefits of some features, so she isn’t sure how each feature would affect the coupon rate of the bond issue. You are Sandra’s assistant, and she has asked you to prepare a memo to Laura describing the effect of each of the following bond features on the coupon rate of the bond. She would also like you to list any advantages or disadvantages of each feature.

  1. The security of the bond (that is, whether the bond has collateral). (5 points)


  1. The seniority of the bond. (5 points)


  1. The presence of a sinking fund. (5 points)


  1. A call provision with specified call dates and call prices. (5 points)


  1. Any positive covenants. Also, discuss several possible positive covenants Quick Air might consider. (5 points)


  1. Any negative covenants. Also, discuss several possible negative covenants Quick Air might consider. (5 points)


  1. A conversion feature (note that Quick Air is not a publicly traded company). (5 points)


Calculate Price

Price (USD)

Why Choose Us For Your Assignment?


We value all our customers' privacy. For that reason, all information stays private and confidential and will never be shared with third parties.


With our service you will never miss a deadline. We use strict follow-ups with our writers to ensure that all papers are submitted on time.


We have no tolerance for plagiarism. All papers go through thorough checking to ensure that no assignments contain plagiarism.

Money Back

You feel unsatisfied with your results? No worries. We offer refunds to our customers if any paper is not written according to the instructions.

Clients Love Us

Client #121678
Client #121678
Read More
This is by far the best I have ever scored in a custom essay. I am surprised the writer handled this assignment so well despite the short notice. I will definitely use your service next time.
Client #21702
Client #21702
Read More
When I was recommended to you by my friends, I wasn't sure you could deliver excellent results for Masters research papers until I submitted my first order. I am all yours now.
Client #20730
Client #20730
Read More
Excellent Services! You are the only assignment helper I can rely on. I have worked with many before and your services are exceptional. I have recommended you to my friends and the results are similar.
Client #20387
Client #20387
Read More
I rarely write reviews online but your services are worth promoting. My paper was so urgent I was sure I was gonna miss the deadline but you turned things around. You are awesome!
Client #20189
Client #20189
Read More
I am a satisfied customer. I know I should have given a 5 star because you deserve it but I will give 4.6 because I almost missed a deadline because of a revision. Luckily it was minor and the writer acted promptly.
Client #20187
Client #20187
Read More
Great paper but there is still some room for improvement. I am impressed by your fast responses and how you tacked my concerns professionally. Thank you for being among the few genuine essay writing service providers.
Client #19783
Client #19783
Read More
I can't thank you enough for being a great part of my college life. I recommended you to two more of my friends. I am sure they will be making their orders soon. I love the fact that you offer free pages for referrals. I will be referring a few more and maybe I won't have to pay for my next two paper, LOL.