Financial Analysis

Financial Analysis

Answer Number 1

Publix super market was founded in the year 1930, it is one of the fastest and the largest employee controlled super market in United States. Publix is based in Georgia, South Carolina , Tennessee and Florida . It was founded by Georgia W Jenkins in the Year 1930. This company has turned in to the list of fortune 500 companies. This is also one of the fastest growing companies in United States. Publix work on the principle of low cost and satisfaction for the customers.

The company is planning to expand 15 stores of it in relation to the Sabor Stores. Being a financial Analyst , I have been assigned the duty of doing a financial analysis of the proposal presented. As we all know that the resource available to us are limited so we have to invest in a way that increases our share holders value (Bragg, 2000). For this, we have to do the capital budgeting of the project. We will try to find out the future cash flows of the company, are the future cash flows negative or positive in term of present value. Is the project giving us more than the cost of capital or our benchmarked return (Friedlob and Schleifer, 2003). We will make use of different techniques like NPV, IRR, and Payback period and discounted Cash Flow.

We will also look into the weighted average cost of capital of the firm. In this, the company cost of capital is proportionally weighted. Like capital sources for e.g. preferred stock, common stock, bonds issuance and other long-term debt cost will be included in the analysis (Gowthorpe, 2008). I will also look in to the debt to equity ratio. I will try to bring the debt to equity ratio to the optimal level from where the return is maximum and the risks are low. As we, all know that debt is the cheapest source of finance due to tax saving but the risk rises, which increases the total cost of loans etc. Thus optimum level would be brought into action (Helfert, 1987).WE will also try to make a optimal capital budget that is all the new capital required for the stores must have an Internal Rate of return greater that WACC , MCC , Cost of retained earnings and cost of new debt. Thus, these are the analysis required for the new project.

Answer Number 2

Dividends payout is a very important step in the company. There are various factors for which promote the company to pay the dividends. It is not always the case that the company has to dividend when it earns profit or don't have to pay in case of losses (Rees, 1995). It all depends on the decision of the management. Since the management can make use of the income for some important project or in other case if the management feels that the management cannot give the shareholders the rate of return than what they can achieve through their ...