Corporate Finance Final Project - Foundations of Financial Management, Response to Web Exercises

Corporate Finance Final Project:  

Foundations of Financial Management, Response to Web Exercises

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xxxxxxxxxx College

Abstract

This paper will answer the web exercises on pages 123, 156, 226, and 331 of Foundations of Financial Management 15th edition.  

Web Exercise, p. 123 - Barnes & Noble. 

In looking at Barnes & Nobles’ financial performance, they have a current stock price of $23.16.  Their 52 week low was $15.45, with a high of $26.22.  In comparison, their current stock price is 12% less than the 52 week high.  This reflects that the stock is doing fairly well, although it would be better if it were within a 10% range of the 52 week high, which is something that investors use in valuing stocks.  (See Appendix A, Table 1 for data), (Barnes & Noble, Inc., 2015d).

In recent press releases for Barnes & Noble, on February 26, 2015, it was announced that Barnes & Noble filed with the U.S. Securities and Exchange Commission to separate Education and retail business to create two independent publically traded companies.  This would separate college business, from their retail sales which includes the NOOK digital business.  The plan is currently scheduled to be completed around the end of August 2015.  In doing so, Barnes & Noble would provide shareholders a tax-free distribution of the two companies.  The intent of the separation is to optimize strategic opportunities.  Investors would be able to clearly assess each company as a separate business.  Having a separate management board, each business will be able to focus on their niche and create leading markets in both the retail and college business.  They are already the largest bookseller operating in all 50 states (Barnes & Noble, Inc., 2015c).

On March 9, 2015 Barnes & Noble reported an investment in Flashnotes Inc. online market place.  Flashnotes allows college students to buy and sell student created study materials for specific courses, as well as tutoring assistance.  This will create a strategic agreement between these two companies.  Peer-to-peer learning is something that has been rapidly growing, with students helping each other in the learning process.  Barnes & Noble will be able to expand into the education service market, and promote Flashnotes.com, and bookstores at schools and online to college students (Barnes & Noble, Inc., 2015a).

        On March 10, 2015, Barnes & Noble reported their 2015 third quarter financial results, (See Appendix A, Table 2), reflecting a consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) increase of 14% compared to the prior year.  Their retail core comparable sales increased 1.7%, and there was a major decrease of 53% from NOOK.  Michael P. Huseby, Chief Executive Officer of Barnes & Noble, Inc. stated, “We are pleased with the performance of our businesses.”  There was stabilization in the physical books business with growth in toys and games.  Although NOOK sales reported a major decline, this loss was due to cost rationalization efforts.  This is rational, as a result of lower unit selling volume.  NOOK EBITDA losses decreased 52.5%, and margins improved on product mix and lower occupancy costs.  Consolidated net earnings reflected an increase to $.93 per share from $.86 per share.  Huseby. Further stated that, “This performance across all business further supports our belief that now is the right time to separate the college business.  The separation will allow each business to optimize their strategic opportunities…” (Barnes & Noble, Inc., 2015b).

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