UNDERSTANDING THE TIME VALUE MONEY FORMULA TIME VALUE OF MONEY TRIDENT UNIVERSITY INTERNATIONAL AVIE MARIE JOHNSTONE STRATEGIC CORPORATE FINANCE FIN501 MODULE 2 SESSION LONG PROJECT PROFESSOR WALTER
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Star Appliances by estimating the company’s cost of equity. The methods used include the dividend discount model‚ the earnings/price model‚ and the CAPM model. After analyzing all three possibilities‚ it is apparent that the CAPM model provides the most accurate estimate of Star Company’s cost of capital because it accounts for the beta. Using the CAPM model‚ the new Star Company cost of equity is calculated as 9.4% and the WACC is determined to be 9.14% at the 9.5% debt rate. In addition to the
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a history of dividend payments by the company and the understandable relationship dividend policy bears to the company’s earnings‚ Rae concludes that the DDM is appropriate to value the equity of Tasty Foods. Further‚ he expects the moderate growth rate of the company to persist and decides to use the Gordon growth model. Rae uses the CAPM to compute the return on equity. He uses the annual yield of 4% on the 10-year Treasury
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P/E ratio will be listed. Furthermore‚ discounted dividend valuation model will be demonstrated and fundamental factors which impact the share pricing will be analysed. Finally‚ the value of ICC at 30 June 2010 will be calculated using P/E ratio and DDM model. Meantime‚ the weakness of those two models will be illustrated‚ and alternative methodology will be applied to calculate the intrinsic valuation of ICC and then compare the result with closing price on 30 June 2010. 2. P/E ratio There are two
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INTRODUCTION: A portfolio manager at North Point Large cap Fund‚ Kimi Ford‚ considers buying shares of Nike‚ Inc. for her mutual fund management firm. In the mid of 2001‚ Nike arranges for an analyst meeting to disclose its Fiscal year results and also to discuss on renewing its strategies to boost its sales growth‚ profits and market share which were all declining. To cope from the situation it decides to develop athletic shoes in the mid-price segment‚ enhance revenues from its apparel line
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firm’s cost of capital? Do you agree with Joanna Cohen’s WACC calculation? Why or why not? 2 If you do not agree with Cohen’s analysis‚ calculate your own WACC for Nike and be prepared to justify your assumptions. 3 Calculate the costs of equity using CAPM‚ the dividend discount model‚ and the earnings capitalization ratio. What are the advantages and disadvantages of each method? Introduction : Solution Question 1 : The WACC is the weighted average cost of capital for a firm
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1) What is the problem facing Prada? The Prada fell into some financial trouble. It needed to raise more than 1 billion euros to meet the long-term debt maturing in one year in 2011 and also required extra capital to implement its expansion plan in Asia market to seize the opportunity in this area which has the highest growth rate compared to the other markets. The demand for this huge amount of capital is quite urgent. The Prada has tried several times for IPO‚ but all terminated by some unlucky
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Score: 120 out of 120 points (100%) 1. award: 10 out of 10 points Which of the following valuation measures is often used to compare firms which have no earnings? Price-to-book ratio P/E ratio Price-to-cash flow ratio Price-to-sales ratio 2. award: 10 out of 10 points When Google’s share price reached $475 per share Google had a P/E ratio of about 68 and an estimated market capitalization rate of 11.5%. Google pays no dividends. What percentage of Google’s stock price was represented
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CAPM Variance‚ standard deviation APR/EAR Capital Structure‚ financial‚ real assets HPR‚ PV‚ FV‚ Constant growth DDM‚ valuation‚ plowback‚ payout‚ growth
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The Evolution of Finance: A Review of Peter Bernstein’s Capital Ideas The world of finance is ever-changing. Over the last century‚ the modern form of economic and financial theory as we see today has been developed and shaped by the minds of many. What we have come to know and accept as fact today were seemingly unheard of nearly fifty years ago. It is with the endless efforts of these like-minded scholars that gives us the opportunity to appreciate the tools and fundamentals we used today to
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