rates fluctuate more than charter rates so when the market is high‚ the demand for spot hire rates is higher because the charterers don’t want to lock in long-term charter rates at high prices. Decreasing daily spot hire rates imply that future cash flows will also decrease because a decrease in hire rates implies decreases in net income and net present value. The cost of a new vessel in present value terms is $33‚738‚397: PV(C) = ΣCn/(1+r)n PV($39M today) = $39M + ($39M/1.09) + ($31
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antiseptic products unit of Montagne Medical? 3 What is the cost of equity capital appropriate for evaluating the free cash flow associated with this investment? 4 What is the correct capital structure and weighted average cost of capital for discounting the investment’s free cash flow? 4 b.What are the amounts and timing of the acquisition investment’s free cash flow from 2013 through 2022? 4 What is the terminal value of the final 10 years of the acquisition‚ as of 2022? 5 What is the
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uncertainty in the financial markets. In July 2000‚ Reed Hastings‚ CEO of NetFlix‚ needed to decide whether the compnay should proceed with the IPO or withdraw it. Investment banks predicted that the IPO of NetFlix would succeed if it showed positive cash flows within a twelve-month horizon‚ but the executives at NetFlix were unsure whether they could achieve that goal. Long-Run Objectives & Performance To Date NetFlix’s long-run objectives are to convert as many free trial users to paid users as possible
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different projects of the future cash flows based on their financing as well as sale of asset strategy. The Management group planned to sell the food assets of the company whereas KKR intended to keep them. The following are the Valuations of the company based on the Prebid cash flows‚ Management Group strategy as well as the KKR group. We use the Capital cash flow method to arrive at the expected share price under each evaluation. We use the capital cash flow method to arrive at the valuation
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Incremental cash flows are the cash flows that should be used in calculating the NPV of a project. The cash flows are changes in cash flows that occur as a direct consequence of accepting a project‚ not the cash flows that the company is already receiving. No we do not include interest expense in the capital budging process‚ because any increase in interest expense related to the firms decision regarded on how to finance the project is a separate decision. Capital budging using incremental cash flow is
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future cash flows 4 NET PRESENT VALUE Cash revenue year 1 Note: cash in the future is worth less than cash now‚ so we discount it + + + + Cash revenue year 2 Cash revenue year 3 Cash revenue year 4 Cash revenue year 5 etc... Linking Market-Based Assets to Shareholder Value Usage‚ impact on repeat usage perceptions‚ image‚ satisfaction‚ awareness‚ knowledge Market-Based Assets Market Performance Shareholder Value Customer Relationships: Faster Market Penetration Accelerate Cash Flows
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net present value (NPV)‚ internal rate of return (IRR) and profitability index (PI). Even though the firm has different evaluation methods to help it decide which project to choose‚ the decision is not always very clear. For instance‚ the future cash flows provided by the project to the firm are not always apparent. It is very obvious that different projects will have different revenues and different risks associated with them. For instance‚ financial managers need to understand what can go wrong
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increase in shipments Should we buy the carrier for 25 years? We will discount all of the Cash Flows at a rate of 6 percent We will only accept a positive NPV for the carrier We will reject a negative NPV for the carrier Hong Kong charges a tax rate of zero The United States will charge at a rate of 35% Hong Kong- Tax Free Environment h Flow + Inv. Cash Flow = Net Cash Flow 2‚483.69 $ (34‚805‚887.40)
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Comparison and Contrast of DCF and CAPM. The definition of Discount Cash Flow is uses of future free cash flow projections and discounts them (most often using the weighted average cost of capital) to arrive at a present value‚ which is used to evaluate the potential for investment. If the value arrived at through DCF analysis is higher than the current cost of the investment‚ the opportunity may be a good one. The Discount Cash Flow shows that changes in long-term growth rates have the greatest impact
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SEAT NUMBER: ……….… ROOM: .………………. FAMILY NAME.………….....…………………………. This question paper must be returned. Candidates are not permitted to remove any part of it from the examination room. OTHER NAMES…………….…………………..…….. STUDENT NUMBER………….………..…………….. SESSION 2 EXAMINATIONS NOVEMBER 2012 Unit Code and Name: AFIN252‚ Applied Financial Analysis and Management Time Allowed: 3 hours plus 10 minutes reading time. Total Number of Questions: 50 Multiple Choice Questions plus 8 full response questions.
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