The memo is a summary of return‚ risk‚ probability of loss and correlation matrix of three main assets‚ equity‚ fixed income and real estate. The data is collected from yahoo finance and Federal Reserve website. The holding period return : (p1-p0)/p0. The risk is measured by standard deviation. The CV represents Coefficient of Variation which is calculated by CV/HPR. The outcome is showed in chart below: Return/Risk/Efficiency Summary 15-year Return Risk CV P(Loss) Equity 4.52%
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Valuation of equity Example based on dividend discount model : Vardhman limited’s earnings and dividends have been growing at a rate of 18% per annum. This growth rate is expected to continue for 4 years. After that the growth rate will fall to 12 % for the next 4 years. Thereafter‚ the growth rate is expected to be 6 % forever. If the last dividend per share was RS. 2.00 And the investor’s required rate of return on verdhman’s equity is 15% what is the intrinsic value per share? Step 1: the
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1. What is the total value of RJR Nabisco under (a) the pre-bid operating strategy? (b) the Management Group’s operating strategy? (c) KKR’s operating strategy? Approach We used the APV approach to value the company under each of the three scenarios. To do so‚ we needed to find the free cash flow‚ debt tax shield‚ and the discount rate‚ which is ra. This rate should be applicable across all three scenarios‚ because it is not dependent on the operations of the company. We then needed to value
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MCQs in lecture from ch 2 1. Accounting theories should be A. Inductive B. Deductive C. Descriptive D. None of the given options is correct 2. Which of the following statements is true about accounting measurements such as profits and assets? A. They are subject to professional judgment B. They would not vary if prepared by different accountants‚ providing they were based on the same set of accounting standards C. They are based on hard‚ objective‚ evidence
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value accounting in IFRS financial statements Considerable attention is currentiy being given to the use of fair vaiues and fair value accounting in financiai statements prepared under internationai Financiai Reporting Standards. This month’s coiumn ciarifies what is meant by fair value accounting and when iFRS require or allow its use. It also identifies the circumstances in which IFRS requires the use of fair value in the application of the historical cost model. In IFRS financial statements
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Accounting can be perfectly explained as a precision tool or language to provide appropriate information with regards to financial position of an organization‚ corporate or business. With this kind of data or information‚ it is always critical for investors as it provides them with relevant and thorough information that could turn out to be the deciding factor on whether to invest or not to invest in a particular business‚ corporate or organization. Therefore‚ nowadays it is very common to find
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Accounting Study Guide for Test # 2 Topic 5: Financial Statement Analysis 5-1 (Q5-1) Explain in general terms the concept of return on investment. Why is this concept important in the analysis of financial performance? Return on investment measures profitability in relation to the amount of investment that has been made in the business. A company can always increase dollar profit by increasing the amount of investment (assuming it is a profitable investment). So‚ dollar profits are not necessarily
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Jide Wintoki From: Richard Smith‚ Scott Mitchell‚ Zack Gregory Re: Mercury Athletic Acquisition Based on our analysis of Mr. Liedtke’s base case projections for a potential acquisition of Mercury Athletic‚ we have concluded that this is a positive net present value project‚ and that AGI should proceed with the acquisition. Under Mr. Liedtke’s operating assumptions‚ we calculate the value of Mercury’s discounted cash flows to be $624.446 million‚ and the acquisition price to be $156.643 million‚ yielding
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Pinkerton (A) Assignment The assignment is twofold. First‚ to advise Tom Wathen as to whether he should buy Pinkerton for the asking price of $100 million. Second‚ regardless of your answer to #1‚ assuming that Wathen does buy Pinkerton‚ should he finance the purchase with Financing Alternative #1 (debt and equity financing from an investment firm) or Alternative #2 (all debt financing from a bank). The financing alternatives are discussed on page 4 of the case. You should do the discounted
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BUS 422 Midterm Exam 1 Spring 2013 Dr. Jing Zhao Instructions: You are allowed to use: 1. Calculator and 2. Formula Sheet Answer all of the following multiple-choice questions. Only one possible answer is correct. When finished‚ please only return both the exam and answer sheet with your name and student ID on it. 1. __________ is NOT a characteristic of a money market instrument. A. liquidity B. marketability C. low risk D. long maturity 2. Which of the following is NOT
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