Set 1 Valuing Cash Flows Problem Set 1 Valuing Cash Flows Exercise 1 (Ex. 11.2 - 11.6 GT): Assume that Marriott’s restaurant division has the following joint distribution with the market return: Market Scenario Bad Good Great .25 .50 .25 Probability Market Return (%) -15 5 25 YR 1. Cash Flow Forecast $40 million $50 million $60 million Assume also that the CAPM holds. 11.2 Compute the expected year 1 restaurant cash flow for Marriott. 11.3 Find the covariance of the cash flow with the market
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option to expand capacity (current full capacity will be reached in 2014) for $60 million and generate additional sales of 20% base sales in 2014‚ 30% in 2015‚ and 40% thereafter. The two companies tentatively agreed on a cash offer of $265 million. However‚ a discounted cash flow (DCF) analysis of the base acquisition and option will be performed along with a strategic and sensitivity analysis to help Sterling determine the value of the acquisition‚ the expansion option‚ and in combination. Sterling
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share = Book value of equity / # of shares i. Current stock price: $51.07 (Yahoo Finance Stock Price as of date 9/21/12) j. Number of shares outstanding (p. 44 Balance Sheet) k. No preferred stock (given) l. Cash‚ short-term investments‚ & non-operating assets = (Cash & cash equivalents) + (Short-term
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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 drivers? 1- The data presented on exhibit 3.7 is‚ indeed following some of the assumptions stated on exhibit 3.1: minimum cash level is 10% of total assets‚ which was proved by dividing cash by total
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consideration to acquire Torrington from Ingersoll-Rand. This reports provides the needed information on Torrington’s worth‚ price at which Torrington could be acquired and the acquisition strategies to negotiate its deal. The evaluation uses the discounted cash flow analysis using WACC to calculate the value of Torrington worth with synergies. The value turned out to be more than the estimated minimum value of the target. The final recommendation is to proceed with the acquisition as planed which would be beneficial
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Tasty Foods Case Summary (Roxana): Tasty Foods Corporation was founded in 1995 by Henry Abercrombie. The corporation is a food conglomerate that has major product lines including cereals‚ frozen dinners‚ canned sodas and fruit juices. Abercrombie founded the company with a small inheritance and with the idea of producing instant hot cereal. The firm’s hot cereal proved to be a success and was well accepted by the consumers. Over the years it grew by its acquisitions and product innovation ideas
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their PSC closures as discontinued operations. The criteria used‚ assessment period‚ presentation‚ and disclosure for this retail company will be explained in detail when applying proper GAAP. A component of an entity comprises operations and cash flows that can be clearly distinguished‚ operationally and for financial reporting purposes‚ from the rest of the entity; it may be a reportable segment or an operating segment‚ a reporting unit‚ a subsidiary‚ or an asset group in which Auto World determined
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is that of value creation for stakeholders in terms of a 52% dividend payout for the projected period from 2002 to 2006. Possible Solutions There can be two possible solutions for the problem at hand. One solution involves the finding out of free cash flows to firms that are sufficient to service debt obligations including interest and
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To: JetBlue Management Team From: Subj: JetBlue IPO Price Recommendation Date: April 11‚ 2002 Introduction JetBlue is a company that was founded on not accepting the status quo with regard to how airline travel is “supposed to be”. Recent history shows that low-fare airlines are gaining momentum‚ and JetBlue’s business model sets us apart- our fleet is newer‚ more reliable and efficient. We offer the lowest cost per available seat mile than any other U.S. airline‚ and we do it while maintaining
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Increasing Gross Profit Margin (Preferably ≥ 40%) ROI Increasing high ROE (Preferably ≥ 15%) Increasing ROIC (Preferably ≥ 15%) Increasing CROIC (Preferably ≥ 15%) Liquidity Increasing Net Cash from Operations Increasing Free Cash Flow / Sales (Preferably ≥ 5%) Increasing Quick Ratio (Preferably ≥ 1) Short & declining Cash Conversion Cycle Efficiency Increasing Net Profit Margin (Preferably ≥ 10%) Increasing OCF/TA (Preferably ≥ 8%) 12‚053 928 29.9% 13‚718 945 30.4% 14‚904 1‚015 26.6% 18‚646
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