Question

In: Finance

1. Comparing Verizon (VZ) and AT&T (T), which company has more leverage? Which one is more...

1. Comparing Verizon (VZ) and AT&T (T), which company has more leverage? Which one is more efficient in collecting receivables? and which one is trading at a higher valuation in terms of earnings? For each question, use the most recent financial data on morningstar.com to justify your answer. Also calculate the internal growth rate for VZ. 2. Comparing Target (TGT) and Kohl's (KSS), which company has more leverage? Which one is more efficient in managing inventory? and which one is trading at a higher valuation in terms of earnings? For each question, use the most recent financial data on morningstar.com to justify your answer. Also calculate the sustainable growth rate for TGT. You have to pull the current data from morningstar.com

2. Comparing Target (TGT) and Kohl's (KSS), which company has more leverage? Which one is more efficient in managing inventory? and which one is trading at a higher valuation in terms of earnings? For each question, use the most recent financial data on morningstar.com to justify your answer. Also calculate the sustainable growth rate for TGT.

Expert Solution

1]

Verizon has a financial leverage of 4.75

AT&T has a financial leverage of 2.99

Verizon has higher financial leverage.

Verizon has a days sales outstanding of 69.93 days

AT&T has a days sales outstanding of 49.46 days

AT&T is more efficient in collecting receivables.

PE ratio = share price / EPS

Verizon = $58.92 / $4.65 = 12.67

AT&T = $29.42 / $1.89 = 15.57

AT&T is trading at a higher valuation in terms of earnings.

IGR = Return on assets * (1 - payout ratio)

Verizon = 6.92% * (1 - 62.3%) = 2.61%

2]

Target has a financial leverage of 3.62

Kohl's has a financial leverage of 2.67

Target has higher financial leverage.

Target has a days inventory of 61.50 days

Kohl's has a days inventory of 105.41 days

Target is more efficient in managing inventory

PE ratio = share price / EPS

Target = $151.02 / $6.36 = 23.75

Kohl's = $21.41 / $4.37 = 4.90

Target is trading at a higher valuation in terms of earnings.

SGR = Return on equity * (1 - payout ratio)

Target = 28.37% * (1 - 41.4%) = 16.62%

jeff jeffy answered 1 year ago

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