Case 1 Report #0502 Group 2 1. Benefits and risks Benefits: (1). Controlled quality By choosing option 3‚ Stryker Corporation can control the quality of PCB by itself. PCB manufactured in its own facility can meet Stryker’s quality requirement better than those from different contract manufacturers. Moreover‚ the quality can be more stable. Stryker would not suffer from the risk of contract manufacturers’ bankruptcy any longer. (2). Reduced cost and higher efficiency Stryker Corporation can
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Title: THE PRACTICAL APPLICATION OF DISCOUNTED CASH-FLOW BASED VALUATION METHODS Publication: Studia Universitatis Babes Bolyai – Oeconomica‚ LII‚ 2/2007 Author Name: Takács‚ András; Language: English Subject: Economy Issue: 2/2007 Page Range: 13-28 Summary: Valuation methods based on Discounted Cash-Flow (DCF) play a major role in the field of company valuation. The current literature contains a reasonably deep and detailed theoretical basis for DCFbased valuation‚ although‚ when starting to
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Table of Contents 1 Introduction 2 2 Determining the Medium and Long Term Growth Rates 4 2.1 Growth in the Telephone Directory Industry 5 2.1.1 Competition 6 2.1.2 Demand for Telephone Lines 9 2.1.3 A Short Summary of the Growth Prospects in the Region 10 2.2 Estimation of the Growth Rates for Argentina 11 2.3 Estimation of the Growth Rates for Brazil 12 2.4 Estimation of the Growth Rates for Chile 13 3 Calculating the Cost of Capital 13 3.1 The Godfrey and Espinosa (1996) Model 14 3
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1. Is Mercury a good target for AGI? Discuss strategic fit of brands‚ products‚ customers‚ and distribution. Identify specific sources of value. Discuss AGI’s strengths/weaknesses compared with other bidders. Mercury AGI Brands Acquire an iconoclastic nonconformist image that trying to exploit by adding a line of active casual footwear. Associated with a lifestyle that was prosperous‚ active and fashion-conscious. products Main on men’s athletic footwear‚ and cover the athletic and casual footwear
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2G Spectrum Scam The Rs 1‚76‚000 crore loot in telecom by the UPA govt 1) What is spectrum? What is its relation with mobile phone services? Spectrum is airwaves. Each operator is assigned a set of frequencies. In normal basic telephone service‚ a pair of wires is used for communication. But in case of mobile/wireless communications‚ airwaves are used instead of wires. These spectrum/airwaves are licensed by the Government. It is allocated in Mega Hertz (MHz) in telecom licenses. 4.2 MHz is given
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liabilities are far more than sufficient to finance the additional assets needed. • Question 3 7.692 out of 7.692 points A company forecasts the free cash flows (in millions) shown below. The weighted average cost of capital is 13%‚ and the FCFs are expected to continue growing at a 5% rate after Year 3. Assuming that the ROIC is expected to remain constant in Year 3 and beyond‚ what is the Year 0 value of operations‚ in millions? Year: 1 2 3 Free cash flow: $15 $10 $40 Answer
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line with those of the industry. So from 2008 to 2012‚ the D/E ratio of AirThread would change continuously until the bullet payment is paid‚ so we expect to use APV valutation method from 2008 to 2012‚ since it is more efficient to adjust the PV of FCF than to figure out the annual WACC. From 2013‚ the D/E ratio of AirThread would be in line with the industry‚ indicating the company will rebalance its D/E ratio‚ so we expect to use WACC method from then on to value AirThread. 2. Before we calculate
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Week 3 Problem Set Answer the following questions and solve the following problems in the space provided. When you are done‚ save the file in the format flastname_Week_3_Problem_Set.docx‚ where flastname is your first initial and you last name‚ and submit it to the appropriate dropbox. Chapter 7 (pages 225–228): 1. Your brother wants to borrow $10‚000 from you. He has offered to pay you back $12‚000 in a year. If the cost of capital of this investment opportunity is 10%‚ what is its NPV? Should you
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for consecutive years • Use “Return on Assets” to discount 2008 – 2012 cash flows • Return on Assets = 7.82% ACC Base-Case Operating FCFs • Total Present Value of Unlevered Cash Flows 2008 – 2012: $1.272 B Excludes terminal value ACC Calculating Terminal Value • Common Assumption: Future cash flows look like the last FCF‚ times a growth factor • Using Weighted-Average Cost of Capital (WACC) we discount all perpetual future cash flows • Terminal Value of Perpetual
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FCF_cap=EBIT(1-t)+depreciation+ amortization -Capex-change of NWC =NI+Interest(1-t) - Change of Net PPE - Change of NWC Step 2: WACC calculation: WACC=%Equity * Re + %Debt*Rd*(1-t) Re=Rf+beta*MRP=15.8% So‚ WACC= 65%*15.8%+35%*10%*(1-0.5)=12.03% Step 3: Multiply FCF with corresponding discount factors (1/(1+WACC)^n) PV(FCFcap)= 166.12 Step 4: Terminal value of equity = 116.2*10 – 117.1=1044.9 Terminal Enterprise value = equity value + debt value – cash = 1044.9 + 391 – 0 = 1435.9 Step 5: Total Enterprise value
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