CORPORATE FINANCE – CONCEPT QUESTIONS Class Notes - Introduction to Corporate Finance 1. Finance point of view: Corporation: a money processing machine? * Product markets: everything what corporates make (lead with customers‚ suppliers‚ labor) * Capital markets: generic term for the entities which supply cash to this money processing machine‚ and the processing machine uses the money to do things and then periodic sends money back to the capital market there are inflows from the
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Valuation- “projected financial performance into values.” Involves projecting/ making budgets. Value of an Asset = Value of Cash Flow (CF) it Will Generate (not profits) CF=1/(1+r)^1 value is based on three things- Current Cash Flow‚ Expected growth (used with to estimate future cash flow)‚ Riskiness of expected future cash flow (discount rate).Net Present Value- Value CFs using project discount rate based on risk Investment Decision-which real assets the firm should acquire.Choose positive and
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Name of the Researcher – Dr. Y. S. Vaishampayan Abstract: The Role of Subsidiary Companies from the Perspectives of Growth and Development THEME - Role of Competition‚ Flexibility and Trade in Economic Growth This Research Paper throws light on the efforts of Indian corporations in their objectives of maximization of shareholders wealth. To achieve this‚ they have taken the route of subsidiarization. This Paper only takes the results achieved by Indian business corporations in fulfilling
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In recent years there has been considerable growth in the use of credit derivatives‚ which protect lenders against the risk that a borrower will default. For example‚ bank A may be reluctant to refuse a loan to a major customer (customer X) but may be concerned about the total size of its exposure to that customer. Speculators in search of large profits (and prepared to tolerate large losses) are attracted by the leverage that derivatives provide. By this we mean that it is not necessary to lay out
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Solution to Case 23 Evaluating Project Risk It’s Better to Be Safe Than Sorry! Questions: 1. What seems to be wrong with the way the NPV of each project has been calculated? Indicate without any calculations‚ how Pete and John should go about recalculating the projects’ NPVs. The NPV of each project has been calculated by discounting the cash flows at the 8% before-tax cost of debt. This is incorrect. Since the company has debt‚ preferred stock and common
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be used as the required return when analyzing a potential acquisition of a retail outlet. C. is the return investors require on the total assets of the firm. D. remains constant when the debt-equity ratio changes. E. is unaffected by changes in corporate tax rates. 7. Which one of the following is the
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Protein Article Search I reviewed “6 Biggest Nutritional Problems Solved” (2008) written by Chris Aceto and Eric Velazquez on the subject of amino acids and how they relate to athletics. The authors believe body builders commonly go overboard in their quest for muscular bodies and neglect key ingredients necessary for muscle production. This relates to amino acids because the authors suggest that athletes frequently leave out fats and proteins made from amino acids. The authors state that
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Environmental problems‚ ranging from Antarctic Ozone hold to global warming‚ are becoming severe and urgently needed to be tackled with. It has gone beyond national boundaries and become an issue that can be only solved by the cooperation of all the countries in the world. Firstly‚ the seriousness of the environmental problems has gone beyond the individual country’s ability to solve. The environment has been polluted for hundreds of year by all the people in every county. Due to lacking of capital
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Having studied this chapter you will be able to: Evaluate the potential value added to a firm arising from a specified capital investment project or portfolio using the net present value model. Project modelling should include explicit treatment of: (a) Inflation & specific price variation (b) Taxation including capital allowances and tax exhaustion (c) Single & multi-period capital rationing to include the formulation of programming methods and the interpretation of their output (d) Probability
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Maxima and Minima First Derivative Test 1) We are given the function First‚ we find the derivative: We set the derivative equal to 0 and solve: Since the domain of f is the same as the domain of f’‚ 4 is the only critical number of f. Testing: x < 4 | f’(0) = -8 | f is decreasing | x > 4 | f’(5) = 2 | f is increasing | By the First Derivative Test‚ x = 4 is a local minimum. 2) We are given the function First‚ we find the derivative: We set the derivative
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