decide whether or not a company should take on a new project or acquisition. The formula for NPV is the difference between the present value of a project’s cash inflows and its cash outflows. To calculate the present values the future cash flows are discounted using the time value of money method. For the project to be accepted the NPV should be positive‚ because it means the return is greater than the required rate of return; or zero‚ because that means the return is equal to the required rate
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NPV‚ IRR‚ and Payback Period To calculate this project’s NPV we had to find the respective cash flows in each year from the initial investment to the end of the five year forecast provided in Exhibit 2 at the end of the case. The initial investment for the building and all the equipment would take place in 2003 and production would begin in 2004. Therefore‚ our “Year 0” was 2003 and we calculated cash flows from operations from 2004 to 2009. To begin analyzing the case we started with cash outflows
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incestment creates wealth if the discounted value of the future cash flow exceeds the up front cost. The problem is what to discount- stick to these rules: 1. Only cash flow is relevant. Net present value depends on future cash flows it’s the difference between cash received and cash paid out. Cash should be recorded only when they occur and not when work is undertaken or a liability is incurred. Ex: taxes should be discounted from their actual payment date. 2. Estimate cash flows on an incremental basis
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more competitive service bundles on company’s service delivery. However‚ the real situation and the anticipated benefits will only be ascertained by insight analysis. MAIN METHODOLOGY ON VALUING ATC APV METHOD: It is imperative to note that‚ discounted cash flow methodology is applied in valuing Air Thread Connection Company. This is critical in establishing the viability of the anticipated acquisition. This methodology requires use of the projections from Air Thread Connections‚ which are given in
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Ticker: ● JNJ:US Recommendation: ● Buy Price: ● USD 90.4 Price Target: ● USD 110.13 2010 2011 2012 2013F 2014F 2015F 2016F 2017F In million Revenue 61‚587 65‚030 67‚224 70‚237 73‚385 76‚674 80‚111 83‚702 Net income 13‚334 9‚672 10‚853 12‚178 13‚665 13‚334 14‚962 16‚789 Per share EPS 4.4 3.49 3.86 3.68 3.60 3.65 3.70 3.75 Dividend/ share 2.11 2.25 2.40 2.40 2.44 2.45 2.3 2.5 BV per share 20.60 20.90 23
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000. It was expected to have a 10-year life and no residual value. Harrel uses straight-line amortization for patents. On December 31‚ 2011‚ the future cash flows from the patent were expected to be $600‚000 per year for the next 8 years. The present value of these cash flows‚ discounted at Harrel’s market value of these cash flows‚ and discounted at Harrel’s market interest rate‚ is $2‚800‚000. At what amount should the patent be carried on the December 31‚ 2011 balance sheet? (Points : 5)
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Questions: 1. Are the financial statements in Exhibit 3.7 consistent with V. Dourtan assumptions in Exhibit 3.1? 2. What’s is the most relevant valuation model‚ APV or Present Value? 3. How are multi-currency cash flows‚ currency risk and political risk being taken into account in our valuation model? 4. What is the relevant cost of capital for Jersey? For R.T. Nakit? Can they be different? Why? 5. What is the Dinar (Pound) value of the joint venture R.T. Nakit (jersey)? What are the project’s value
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transactions analysis (Exhibit 11)? Why? 3. Wasserstein‚ Perella & Co. established a valuation range of $68-$80 per common share for Interco. Show that this valuation range can follow from the assumptions described in the discounted cash flow analysis section of Exhibit 12. As a member of Interco’s board‚ which assumptions would
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JetBlue IPO WACC The estimation of cost of capital for JetBlue proved to be a difficult process. Considering the company has an unfavorable capital structure‚ due to the fact that they are acquiring a large number of aircrafts‚ simply taking the weights of debt and equity are not acceptable. In order to accurately judge the discount rate the multiples method is necessary. The comparison was to a leading low-fare airline company‚ Southwest. Another critical point is that taking the book
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Ratios 7 Efficiency Ratios 7 Financial Strength Ratios 8 Dividend Ratios 8 Management Effectiveness Ratios 8 Discounted Cash Flow Valuation 9 Calculation of Weighted Average Cost of Capital 9 Cost of Equity Calculation 9 Pro Forma Financial Statements 10 Pro forma Profit and Loss Statement 10 Pro forma Balance Sheet 11 Proforma Cash Flow Statement 11 DCF using FCFF 11 Sensitivity Analysis 12 Results and Conclusion 12 References 14 Introduction to
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