CORPORATE FINANCIAL POLICY & STRATEGY‚ FALL 2012 INSTRUCTOR: TOM BARKLEY CASE #2 – “Groupe Ariel: Parity Conditions and Cross-Border Valuation” Written reports are to be no more than five typed pages (based on a 12-point Times New Roman font‚ double-spaced‚ with 1-inch margins all around). The assignments are due at the beginning of class on Thursday‚ November 8‚ 2012. This case is designed to introduce discounted cash flow valuation techniques in a cross-border setting. Groupe Ariel’s Mexican
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CASH FLOWS AND FINANCIAL STATEMENTS AT SUNSET BOARDS Below are the financial statements that you are asked to prepare. 1. The income statement for each year will look like this: | Income statement | | | 2008 | | 2009 | | Sales | $247‚259 | | $301‚392 | | Cost of goods sold | 126‚038 | | 159‚143 | | Selling & administrative | 24‚787 | | 32‚352 | | Depreciation | 35‚581 | | 40‚217 | | EBIT | $60‚853 | | $69‚680 | | Interest | 7‚735 | | 8‚866 | |
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Purchasing real estate or making a transaction of this size will always maintain a level of risk. The low liquidity of real estate poses the biggest risk. As the investment carries substantial upfront costs and for length of time I own the property‚ expenses can be high. The risk may be higher for this particular home as it has been listed for a number of months with a number of times where they lowered the price. Suggesting the perceived market value of the home to be less than what it is listed
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Arundel Partners: The Sequel project 1. Why do the principals of Arundel Partners think they can make money buying movie sequel rights? Why do the partners want to buy a portfolio of rights in advance rather than negotiating movie-by-movie to buy them? • The principals of Arundel Partners think they can make money buying movie sequel rights because they can use unpredictability of a movie’s success to their advantage. This can be done by exercising the right if the movie is a success
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budgeting? a Will an investment generate adequate cash flows to promptly recover its cost? b Will an investment generate an acceptable rate of return? c Will an investment have a positive net present value? d Will an investment have an adverse effect on the environment? 3 Which of the following is not considered when using the payback period to evaluate an investment? a The profitability of the investment over its entire life. b The annual net cash flow of the investment. c The cost of the investment
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stock had an initial price of $92 per share‚ paid a dividend of $1.45 per share during the year‚ and had an ending share price of $104. Compute the percentage total return. The return of any asset is the increase in price‚ plus any dividends or cash flows‚ all divided by the initial price. The return of this stock is: R = [($104 – 92) + 1.45] / $92 R = 0.1462 or 14.62% Calculating Returns Rework the problem above‚ but this time assuming the ending share price is $81. Using the equation
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When “An Arundel Tomb” was first published in The Whitsun Weddings in 1964‚ a number of reviewers singled the poem out for comment. Christopher Ricks‚ in The New York Review of Books‚ described Larkin as “the best poet England now has‚” and said of the collection “people will be grateful for its best poems for a long time.” Ricks listed “An Arundel Tomb” as one of the six best poems. Praise came also from Joseph L. Feather-stone‚ in New Republic‚ who used the last two lines of the poem to illustrate
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This case report discussed the financial and business situation of an investment group‚ Arundel Partners. Arundel partners focused its investments on the sequel rights of that ‘associated with firms produced by one or more major U.S. movie studios’. As owner of the rights‚ Arundel could continue or reject the production of sequel. Business The proposal was innovative but at the same time‚ very risky. According to the case report‚ ‘Arundel would purchase the sequel rights before the first film
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out with a new business idea. The idea was to create an investment group‚ Arundel Partners‚ to purchase the sequel rights associated with films produced by one or more major U.S. movie studios. As owner the rights‚ Arundel would wait to see if a movie was successful‚ and then decide whether or not to produce a second film based on the story or characters of the first. One of the unique features of the new idea was that Arundel would purchase sequel rights before the first films were even made and released
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Using this online NPV Calculation Tool http://finance.thinkanddone.com/online-n… we get the following NPV at 15% Net Cash Flows CF0 = -3000000 CF1 = 1100000 CF2 = 1450000 CF3 = 1300000 CF4 = 950000 Discounted Net Cash Flows DCF1 = 1100000/(1+0.15)^1 = 1100000/1.15 = 956521.74 DCF2 = 1450000/(1+0.15)^2 = 1450000/1.3225 = 1096408.32 DCF3 = 1300000/(1+0.15)^3 = 1300000/1.52087 = 854771.1 DCF4 = 950000/(1+0.15)^4 = 950000/1.74901 = 543165.58 NPV Calculation NPV = 956521.74
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