CASE STUDIES IN FINACE CASE STUDY 3: ESTIMATING THE COST OF CAPITAL QUESTION 1: a)b)c) The Capital Assets Price Model (CAPM) is used to describe the relationship between risk and expected return and is often used to estimate a cost of equity (Investopedia‚ 2009). The cost of equity(COE) of the discount rate is: R = Rf + β*(E - Rf) (1) Rf = Risk free rate of return‚ usually U.S. treasury bonds β = Beta for a company E = Expected return of the market
Premium Weighted average cost of capital Boeing Commercial Airplanes Rate of return
Chapter 2 -CAPM: how risk affects return -Expected Return (on investment): mean value of its probability distribution of returns; greater the probability return will be below expected‚ greater the stand-alone risk -Risk Averse: he/she must be compensated for holding risky assets -Asset has 2 risk types: Diversifiable risk can be eliminated by diversification; market risk cannot be eliminated -Market risk measured by standard deviation of returns on portfolio consisting of all stocks -Relevant
Premium Net present value Investment Corporate finance
CORPORATE FINANCE 307 LITERATURE REVIEW Student Name / ID: Chay Yu Xi 15907811 Jacqueline Teo Hui Yun 15805054 Ting Heng Huat 14973837 Tutor: Leo Kee Chye Tutorial Day / Time: Monday / 2pm Table of Contents Abstract The Tech Bubble Introduction Lowering of Interest Rates Adjustable Rate Mortgage Securitization Mortgage Backed Securities Collateralized Debt Obligation Credit Default Swap Government Reaction and Policies Emergency TARP Repercussions
Premium Subprime mortgage crisis Mortgage
(excluding multiple-choice questions) Please‚ keep at least 4 decimal points while performing your calculations. Marks will be deducted for rough rounding!!! The exam consists of two parts and one bonus question and is counted out of 40 points. In case your total mark (including the bonus question) exceeds 40 points‚ you will be awarded only 40 points for this exam and no extra credits will be given for the remaining points. Note s to Grader: Please‚ do not double-punish students for the
Premium Stock Stock market Debt
CASE STUDY Managing resources for corporate entrepreneurship: the case of Naturis Introduction: In a world of ever increasing global economy‚ the idea of corporate entrepreneurship has become a topic that leaders and managers must not only be aware of conceptually but also understand in order to be able to strategize and position for organizational viability. As a growing competitive advantage for organizations‚ succeeding in corporate entrepreneurship is a necessity in today’s market place
Premium Scientific method Organization Management
ACCOUNTING TOOLS FOR BUSINESS DECISION MAKING SIXTH EDITION MANAGERIAL This page intentionally left blank Jerry J. Weygandt PhD‚ CPA University of Wisconsin—Madison Madison‚ Wisconsin Paul D. Kimmel PhD‚ CPA University of Wisconsin—Milwaukee Milwaukee‚ Wisconsin John Wiley & Sons‚ Inc. Donald E. Kieso PhD‚ CPA Northern Illinois University DeKalb‚ Illinois Dedicated to the Wiley sales representatives who sell our books and service our adopters in a professional and ethical
Premium Management accounting Cost accounting Activity-based costing
Corporate Finance – Chapter 2 – Long Quiz 1 1) Marvelous Entertainment Group‚ Inc. had net income of $32.7 million in 2005. The firm paid no dividends. If there were no further changes to the stockholders ’ equity accounts‚ then _____ by $32.7 million. [ ] common stock must have increased √ [ ] retained earnings must have increased [ ] total stockholders ’ equity must have decreased [ ] capital surplus must have decreased [ ] the market value of the firm ’s stock must have
Premium Generally Accepted Accounting Principles
in the calculation * Rule: Determine all CF which will be realized if the project is taken. Subtract from this the CF that will be realized if the project is not taken. Result represents the CF impact of the project. The present discounted value of these incremental CF is the NPV of the project * CF = EBIT – Taxes + Depreciation – Capital Expenditures (CAPX) * EBIT (Earnings Before Interest & Taxes) = Revenues – Cost – Depreciation * EBIAT = EBIT * (1-TaxRate) * Taxes
Premium Discounted cash flow Net present value Corporate finance
Case 9: Horniman Horticulture 1. Assess the strengths and weaknesses of the company Horniman Horticulture. Strengths * Constantly growing firm with increasing revenue (15.5% in 2005)‚ net profit‚ total assets and high returns on equity (5.1% in 2005) * Large product offerings‚ with a recent increase of 40%. Majority of offerings are in high demand * Management (in regards to Bob Brown) has good ties with employees and customers * Tax expense hasn’t drastically
Premium Balance sheet Asset
Value Chain as Competitive Advantage Unit 3 Assignment Gerod Washington GB570 Managing the Value Chain John Craddock Kaplan University April 6‚ 2014 Value Chain as Competitive Advantage Successful companies are successful because of their ability manage the intrinsic concept which develops and evolves their value chain and competitive advantage. The purpose of this paper is to provide the reader with a compelling argument as to why an effective value chain creates competitive advantage
Premium Marketing Competition