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Base your answers on information from the most current bond and stock quotations from The Wall Street Journal, a Standard & Poor's Bond Guide, bondsonline.com, or another reliable bond information source.

? How is Microsoft's bonds listed? How many bond issues does the company currently have listed on the bond market and what are their market prices? In what year will the bonds mature? What is the current yield on the listed bonds, assuming an indefinite maturity date? What is the weighted-average interest rate (yield to maturity of the listed bonds? How is the company's stock listed? What is the current market price of the company's common stock? What is your stock's Beta? What is Microsoft's stock's required rate of return using the Capital Asset Pricing Model (CAPM)? (Assume the average T-Bill yield is 5.5%, and the market return is 10%)
? Does Microsoft have any preferred stocks outstanding? List them. What is the weighted average of all the yields of the preferred stocks?
What percentage of Microsoft is financed by debt? What percentage of the company is financed by equity? What percentage of Microsoft is financed by preferred stock? What is Microsoft's Weighted Average Cost of capital (WACC)?

***** PLEASE LIST 2 to 3 SOURCES THAT CAN BE ACCESSED. ACTUAL SOURCES OF ANSWERS TO QUESTIONS******

1. Imagine that you've prepared a Capital Budget for your company and made an investment decision. You've gathered all your Cost data and estimated your Cash Inflows and chose the project or investment that would benefit your company the most. What could go wrong? What would you do to manage what went wrong?

2. What are effective ways for company financial managers to manage risk? If you were a company financial manager, how would you manage your company's risk?

3. Assuming you worked for Apple, How can you apply Capital Budgeting methods with the company that you work for? If you were the CFO for your company, what changes would you make in the company project investment decisions?

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Microsoft is one of the largest computer software organizations in the world having revenues of more than $45 bn annually. It has got a monopoly in operating software industry and is providing a wide variety of software and ecommerce services and products. This includes operating systems for personal computers (PGs) and servers; server applications for client/server environments; business and consumer productivity applications; software development tools; and Internet and intranet software and technologies. The company has expanded its interactive content efforts, including NSN (the Microsoft Network online service), various Internet-based services, and entertainment and information software programs. Microsoft also sells PC books and input devices, and it researches and develops advanced technologies for the future software products.

http://finance.yahoo.com/q/pr?s=MSFT

? How is Microsoft's bonds listed? How many bond issues does the company currently have listed on the bond market and what are their market prices? In what year will the bonds mature? What is the current yield on the listed bonds, assuming an indefinite maturity date? What is the weighted-average interest rate (yield to maturity of the listed bonds?

Microsoft has not issued any debt.
(References: http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=US:MSFT&lstStatement=Balance&stmtView=Ann)

How is the company's stock listed? What is the current market price of the company's common stock? What is your stock's Beta? What is Microsoft's stock's required rate of return using the Capital Asset Pricing Model (CAPM)? (Assume the average T-Bill yield is 5.5%, and the market return is 10%)

Company's stock is listed in the NASDAQ stock exchange. Its current market price is $29.52 per share. The stock's beta is 1.04
The stock's required rate of return =10.18% (For details see excel file attached)

(Source of Beta and other data: http://finance.yahoo.com/q/ks?s=MSFT)

Does Microsoft have any preferred stocks outstanding? List them. What is the weighted average of all the yields of the preferred stocks? What ...

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See Also This Related BrainMass Solution

Microsoft: Marketing Strategy

Marketing Spotlight - Microsoft

Microsoft was founded in 1975, when Bill Gates left Harvard at age 19 to work with high school friend Paul Allen on a version of the BASIC programming language. After moving the company from Albuquerque, New Mexico, to Seattle in 1979, Gates and Allen began writing operating system software. What happened to the company since its founding is a well-known and often-told story. Key strategies that enabled Microsoft to achieve such remarkable growth in the competition-laden computer industry include product innovation, brand extension, heavy advertising, competitive toughness, and product expansion.

In 2005, Microsoft shook up the marketplace - and the marketing industry - again with its non-traditional launch for the Xbox 360 - read the below article and address the following questions (can also be found at: http://news.com.com/Commentary+Microsofts+Xbox+360+spin/2030-1069_3-5706144.html)

1. What are the key elements of Microsoft's marketing strategy for the Xbox 360?

2. What are the similarities and differences compared to past product rollouts within Microsoft and compare to the rest of the industry?

3. Could Microsoft be considered one of the best and worst examples of marketing success in America during the 1980s and 1990s? DISCUSS

4. Do any of the Microsoft strategies contradict future issues that Microsoft and other technology-oriented firms should prepare to deal with in coming years?

Article:

Commentary: Microsoft's Xbox 360 spin

By Forrester Research
Special to CNET News.com
May 13, 2005, 8:49AM PDT

by Fiona McDonnell and Paul Jackson, analysts

The heavy hitters of the video game industry will gather next week in Los Angeles for the E3 conference--and should get a first glance at next-generation consoles from Sony and Nintendo.

Related story
Xbox 360 launch
gets jump on rivals
Microsoft beats rivals
in unveiling new generation
of console first.

But Microsoft has taken a radically different approach to showcasing its wares: A prime-time MTV special Thursday unveiled the Xbox 360 to consumers four days before E3, aka the Electronic Entertainment Expo, starts. This direct-to-consumer strategy will give the new Xbox an advantage and transform the game industry's marketing and product development practices.

E3 is the de facto conference for new game platform announcements. It is where the Sony PlayStation Portable and Nintendo DS were unveiled in 2004, and where American game professionals got their hands on the Sony PlayStation 2 for the first time in 2000. This year Sony will unveil the PlayStation 3 and Nintendo, in classic fashion, may or may not show its "Revolution" console.

Microsoft's MTV maneuver, meanwhile, allows Redmond to do the following:

? Sidestep the industry shindig and talk directly to potential consumers. New hardware is usually unveiled first to partners and developers behind closed doors, then to industry players and analysts at events like E3, and finally to consumers a couple of months before release. Microsoft is breaking this golden rule and taking its offering directly to consumers--despite a wait of at least six months until the console ships. The company risks killing its existing hardware-line sales and stunting software sales, but puts even more pressure on Sony and Nintendo to get their offerings to market.

? Reduce the classic five-year game console cycle. Video game consoles typically have a five-year life cycle--taking a new platform from early adopters through the mass market and into obsolescence. However, by the time the Xbox 360 hits U.S. shores, the original machine will have been out for only four years. Rather than wait a year--and give Sony the market to itself, as it did with its PlayStation 2 in 2000--Microsoft is seeking to reverse the situation.

? Build a frenzy of community speculation and support. Sony is widely credited with bringing the image of game consoles up-to-date with the marketing, product placement and design work it did around PlayStation and PlayStation 2. But this was in the days before blogging and Emotive Networks. Speculation around the next Xbox among gamers has built to a frenzy over the past six months--carefully fed by occasional press quotes from Bill Gates, leaked images and viral messaging spread via Microsoft's Ourcolony.net site.

For Microsoft, little to lose
The video game industry is about to enter another period of extended growth, and it's widely acknowledged that, Asia-Pacific aside, Microsoft has been more successful with its Xbox market entry than many people expected. But that isn't enough for Microsoft: It wants to be the No. 1 player. As a recent entrant to the game console market, it needs impact and is not afraid to overturn old conventions and try something new. Microsoft's Xbox marketing strategy is:

? A key building block in the overall Microsoft brand strategy. In revealing and promoting its new console through nontraditional means with multiple partners and six months before shipment, Microsoft stands to create goodwill with demanding gaming consumers and beyond. With a gamers-first approach that will create positive associations with its brand, the company aims to offset some of its negative branding in the PC market, where it frequently comes under fire for being the dominant, less innovative player. Additionally, aside from an XP branding campaign, Microsoft has few new products to promote until Longhorn in late 2006.

? A spoiler strategy to appeal to switchers. Talking to consumers now and bringing the Xbox 360 to stores before the end of 2005, probably long before Sony's or Nintendo's new devices, will give Microsoft a big perceived lead in the market. Microsoft is well placed to gain significant market share in a market whose product cycle has a front-loaded revenue stream. How? By stockpiling consumer sales from potential switchers in the months prior to launch and by maintaining sales of current-generation Xbox games if it ensures their compatibility with the Xbox 360.

? A foray into viral marketing. After the success of the "I love bees" viral campaign used to promote "Halo 2," Microsoft created Ourcolony.net to build buzz and officially release teaser images. One key element of this site is its exclusivity: Microsoft hasn't promoted it overtly, but simply waited for keen-eyed consumers to make the connection. Even then, the site is difficult to access unless you are a keen gamer.

? A way to break the new console out of the gaming ghetto. Another interesting move has been Microsoft's recent agreement with Samsung to collocate next-generation Xboxes with its high-definition TVs in retail stores. This allows the console to escape the intimidating--and often poorly laid-out--gaming aisles and attach itself to the cool new world of HDTV.

Changing the rules of the game
To win as the last entrant into a developed, albeit dynamic, market requires disruption in some way. Microsoft's strategy has a number of impacts on the game industry and the wider world of marketing.

? Consumer involvement in marketing inspires game design. To date, Microsoft has mainly used "I love bees" and Ourcolony.net as promotional tools--but given the level of consumer interest and the connectivity potential of the new consoles, it can only be a matter of time before that company and others start using these mechanisms to test out game ideas and distribute freebies like demos and coupons. Building on the interactive campaigns, Microsoft takes the gaming experience out of the living room, blurring the line between product and marketing to become synonymous with "gaming."

? Sony and Nintendo need to respond fast. With Xbox messages hitting consumers today, Sony and Nintendo can't wait a year to fight back. Nintendo will continue to focus on game-play innovation and "pure" gaming. Some of its regional PR and marketing partners have implemented imaginative TV, print and outdoor campaigns, but don't expect to see Nintendo radically changing its marketing strategy any time soon. Do expect a more aggressive response from Sony--which isn't about to give up the console crown to the Redmond pretender: As recent content partnerships for the PSP have shown, Sony can still drive innovation and excite consumers. What both companies will have to accept is that Microsoft's strategy has cut short the life of the current generation of hardware.

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