1. (45 points) Calculate the value of Carborundum (on an aggregate and per share basis) using both the Free Cash Flow to Capital (FCFcap) and Free Cash Flow to Equity (FCFeq) methods. Use the following assumptions: Note: Rf=5.6%; MRP=8.8%‚ Carborundum’s levered beta (prior to deal)=1.16 FCFeq=Net Income + Non Cash Deductions-Capital Expenditures-Change in Net Working Capital-Debt Repayment+ Debt Issuances + Miscellaneous Extras Answer: Value of Kennecott using FCFcap is: $53.8 Value of Kennecott
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the same industry. ACE estimates its free cash flows that will be available to the enterprise next year at $5‚200‚000. Since the venture is now in its maturity stage‚ ACE’s free cash flows are expected to continue to grow at a 6 percent annual compound growth rate in the future. A weighted average cost of capital (WACC) for the venture is estimated at 15 percent. Interest-bearing debt owed by ACE is $17.5 million. In addition‚ the venture has surplus cash of $4 million. ACE currently has five million
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Q1 Definition of ’Accounting Information System - AIS’ The collection‚ storage and processing of financial and accounting data that is used by decision makers. An accounting information system is generally a computer-based method for tracking accounting activity in conjunction with information technology resources. The resulting statistical reports can be used internally by management or externally by other interested parties including investors‚ creditors and tax authorities. Investopedia
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Introduction 3 Analysis 4 Figure 1: Risk Comparison between Plans L and H 4 Figure 2: Operating probability under Plan L and H 5 Figure 3: Expected ROIC under plan L 5 Figure 4: Expected ROIC under plan H 6 Figure 5: Expected EBIT‚ NOPAT and future Cash Flows 7 Figure 6: Effects of the Financial Leverage on ROE 8 Figure 7: WACC and TIE Calculations 9 Figure 8: EPS and Stoke Price 10 Figure 9: Optimal Capital Structure 12 Conclusion 12 Case Study Data Tables 13 Table 1. Financial Statement and Other Data
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acquire? How much should Genzyme pay for its interest? We will attempt to answer these questions by first giving a brief overview of the two companies involved‚ and then by calculating the Net Present Value of the joint venture based on expected cash flows. Because we were given no operating history of the two companies‚ this is the only method we will use to determine what interest Genzyme should take in the joint venture. We will provide answers in three different scenarios: Genzyme’s estimates
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Value appropriation: vital in achieving sustained competitive advantage Table of contents 1 Introduction 3 2 The role of marketing 4 3 Measuring marketing productivity 5 3.1 Customer Satisfaction and future cash flows 7 3.2 Shareholder value 9 4 Creating sustained competitive advantage 10 4.1 Value creation versus value appropriation 10 4.2 Strategic emphasis in practice 11 5 How to prevent imitation? 13 6 Limitations
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PRINCIPLES OF VALUATION Because rational people prefer to receive benefits sooner than later and make sacrifices later than sooner‚ money‚ which provides the option to buy benefits‚ is likewise preferred sooner to later. If an individual prefers money sooner than later‚ then he/she values a dollar today more than a dollar tomorrow or a dollar in one year from now. A dollar today is worth a dollar today: therefore‚ a dollar next year must be worth less than a dollar today since it is less preferable/valuable
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the upper hand in negotiations? Prior to looking at the offer price in more detail‚ do you think this will be a good deal for Disney in the long run? 3. Why did MVL management want stock vs. cash? 4. Using MVL’s historical financial statements (available on class website)‚ estimate MVL’s future cash flows using reasonable assumptions. Conduct a DCF analysis at
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Accounting Education: an international journal Vol. 15‚ No. 1‚ 3 –10‚ March 2006 Why DCF Capital Budgeting is Bad for Business and Why Business Schools Should Stop Teaching it RALPH W. ADLER University of Otago‚ New Zealand Introduction As educators‚ we are constantly making decisions about course content. Each year‚ as we begin our preparations for writing our new or updated course outlines‚ such questions as what topics to include‚ modify‚ or exclude‚ are contemplated and re-contemplated
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Project report on Highlights of ’Financial Management’ In Public Sector Undertakings CONTENTS 1. Introduction 2. Highlights of financial management in public sector undertakings - Budgets in Public Sector - Revised Budget - Sources of Funds in Public Sector - Role of Financial Advisor - Capital Budgeting - Working Capital Management - Financial Delegation - Financial Reporting - Profitability of Central Public Sector Undertakings 3. Role of financial management in the reforming of psu’s - Performance
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