described in the previous part‚ the developing countries due to inability to serve their debts were forced to borrow funds from the IMF and the World Bank and accept the severe structural adjustment programs bound to the loans. The same happened to the developed European countries‚ which were badly hit by the global financial and then by the Eurozone sovereign debt crises in 2008 and 2010 respectively. The debt crisis has shown that the problem of indebtedness is no longer exclusive for developing
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A common feature of all the financial crises is that the financial instability and a highly leveraged private sector created a financial boom which finally led to the bubble and subsequently to the bust. 1. Financial instability In EU crisis and US financial crisis cases the banking sector was hit hardest and accelerated the crisis through a credit crunch and credit crisis. Whereas in the US this process was driven by a real estate boom and the issuance of complex securities (as bad assets)‚ in
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Chapter 21 - Leasing PowerPoint Notes * 21.1 Types of Leases * The Basics * A lease is a contractual agreement between a lessee and lessor. * The lessor owns the asset and for a fee allows the lessee to use the asset. * Buying versus Leasing * Operating Leases * Usually not fully amortized * Usually require the lessor to maintain and insure the asset * Lessee enjoys a cancellation option * Financial Leases
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whole of India. (3) It shall be deemed to have come into force on the 21st day of June‚ 2002. 2. Definitions (1) In this Act‚ unless the context otherwise requires‚-(a) "Appellate Tribunal" means a Debts Recovery Appellate Tribunal established under sub-section (1) of section 8 of the Recovery of Debts Due to Banks and Financial Institutions Act‚ 1993 (51 of 1993); (b) "asset reconstruction" means acquisition by any securitisation company or reconstruction company of any right or interest of any bank
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pay their student load‚ and it does not guarantee a better career after they graduate. The student loan is tremendously increasing every second. From the video‚ they stated that “175% increase tuition from year 1979 to 2010”. The student will be on debt after they graduate in college. One of the reasons why the tuition is rapidly increasing is because the schools like to have a better campus. The schools would spend money to build buildings so they can attract more students to enroll. The schools
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Miller (1958) ‘The Cost of Capital‚ Corporation Finance and the Theory of Investment’ This article mainly discusses the cost of capital‚ the required return necessary to make a capital budgeting project worthwhile. Cost of capital includes the cost of debt and the cost of equity. Theorist conclude that the cost of capital to the owners of a firm is simply the rate of interest on bonds. In a world without uncertainty the rational approach would be (1) to maximize profits and (2) to maximize market value
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8*(1+0.0569)/(0.0720.0569)=56.076 Adjusted Closing share price for 2012 = 34.15 Thus the stock is undervalued. b) 105=6.95%/2*100*[11/(1+k)^12]/k+100/(1+k)^12 k=2.97% Thus‚ YTM=2.97%*2=5.94% c) Coupon rate= 5.94% Cost of equity ke= 0.072 Debt= 12‚095+1848 =13‚943 Equity= 24‚508 D/E=0.5689 D/V=0.3626‚ S/V=0.6374 Knewd = 0.0594(10.25)/0.995= 0.04477 WACC=0.072*0.6374+0.04477*0.3626=0.062 Question 2 –Mergers & Acquisitions (10 marks) Question 2 – Mergers & Acquisitions
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Mini Cases: Cost of Capital Part A: Cost of Debt Mini Case 1: Cost of perpetual/Irredeemable debt Ashok Leyland issued Rs 100 Lakhs 12% debentures of Rs. 100 each. Calculate the cost of debt in each of the following cases. (Assume corporate tax rate being 40%). Case (a) If debentures are issued at par with no floatation cost. Case (b) If debentures are issued at par with 5% floatation cost. Case (c) If debentures are issued at 10% premium with 5% floatation cost. Case (d) If debentures are issued
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Introduction Asset sales on the secondary loan markets‚ have become a more important part of the financial system over the last two decades. The big rise in activity initially arose as a result of the 1980’s sovereign debt crisis where banks sought to reduce their exposure to certain sovereign debts by selling on some of the loans. Then banks and certain other financial institutions then began through the 1990’s and 2000’s to utilise the secondary market more extensively to maximise the available profits1
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Winston and Yvonne‚ we concluded that Winston and Yvonne are in stage 2: the savings stage of the financial life cycle phase. This stage of the life cycle is usually characterized by the increase of assets‚ net worth and the decline in the use of debts‚ as by this stage Winston and Yvonne have already accumulated more assets over the years and would seek to protect their wealth and priorities and at the same time seek to be more risk adverse than before. People in this stage are usually concerned
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