The University of Lethbridge Calgary Campus Faculty of Management Management 4430Y Financial Management Spring 2011 A.P. Palasvirta Office: Markin 4132‚ Lethbridge Phone: (403) 332-4582 e-mail: oz.palasvirta@uleth.ca Goal of Course Management 4430 is the capstone course in finance and will incorporate concepts you have learned in through your study of corporate‚ investments‚ and international. We will utilize the case methodology to focus our analysis. Cases describe a context
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Valuation: Basics! Aswath Damodaran Aswath Damodaran! 1! Approaches to Valuation! Intrinsic valuation‚ relates the value of an asset to the present value of expected future cashflows on that asset. In its most common form‚ this takes the form of a discounted cash flow valuation. Relative valuation‚ estimates the value of an asset by looking at the pricing of ’comparable’ assets relative to a common variable like earnings‚ cashflows‚ book value or sales. Contingent
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of capital‚ Accenture is at higher risk in undertaking the new projects. The distribution payout ratio for both the companies is also determined to find how much percentage is paid out to the shareholders and how much percentage is used to reinvest in the business. IBM has a distribution payout ratio of 30.3 percent and Accenture has 81.9 percent distribution payout ratio in 2011. Since the distribution payout ratio of IBM is lesser than the Accenture‚ the management of IBM is more efficient than Accenture
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$2.20. [Total of two graphs] Question 2 (12 points) Greater Manufacturing is evaluating two different operating structures which are described below. The firm has annual interest expense of $250‚ common shares outstanding of 1‚000‚ and a tax rate of 40 percent. (a) For each operating structure‚ calculate (a1) EBIT and EPS at 10‚000‚ 20‚000‚ and 30‚000 units. (a2) the degree of operating leverage (DOL) and degree of total leverage (DTL) using 20‚000 units as a base sales level. (a3) the operating
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expiration. A. Max(0‚ ST - X) B. Min(0‚ ST - X) C. Max(0‚ X - ST) D. Min(0‚ X - ST) 1 1. C 2. A 3. B 4. B 5. A Long Call Profit = Max[0‚($123 - $120)(100)] - $500 = -$200 1. A firm that has an ROE of 12% is considering cutting its dividend payout. The stockholders of the firm desire a dividend yield of 4% and a capital gain yield of 9%. Given this information
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The clientele effect shows us who holds most of our outstanding shares. High tax-bracket individuals would prefer zero-to-low dividend payout to save on taxes. Low tax-bracket individuals would prefer a low-to-medium dividend payout‚ which gives them additional income while helping them save on taxes. An investing corporation would prefer a higher dividend payout because if they own a significant amount of shares‚ say 1 million‚ the income stream from that dividend would provide the company with
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Question 1: (1) Ten multiple choice questions. When a firm’s investment decisions have different consequences for the value of equity and the value of debt‚ managers may take actions A) that benefit shareholders at the expense of debt holders. B) to decrease costs of distress. C) to reduce fixed costs. D) to increase debt values. (2) Which of the following is NOT an advantage of private debt over public debt? A) B) C) D) It does not dilute the ownership of the firm. It has to have interest
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per year. Other things equal (e.g.‚ assuming no changes in sales)‚ if the firm changes the terms of credit it offers to its customers from “1/15 net 40” to “2/10 net 50”‚ then the firm’s Accounts Receivable Period will _______________. A. decrease B. increase C. either increase or decrease D. stay the same E. none of the above Answer: A. With “1/15 net 40”‚ EAR = (1 + 1/99)365/25 – 1 = 15.8% < 18%. So‚ before the change in credit policy‚ customers
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30% equity. The company anticipates that its capital budget for the upcoming year will be $3 million. If Axel reports net income of $2 million and follows a residual distribution model with all distributions as dividends‚ what will be its dividend payout ratio? $410‚000 (3000000/5000000)*1000000 – (500000/5000000)*1000000 - .05(6000000)(1-.07) .6*1000000 - .1*1000000 – 300000*.3 600000-100000-90000 =410000 (13-2) Value of Operations of Constant Growth Firm EMC Corporation has never paid
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These major companies include Otis Elevator Company‚ Pratt and Whitney‚ Sikorsky‚ UTC Aerospace Systems‚ and UTC Climate‚ Controls & Security. UTC is also notable for being a United States military contractor and contributing products such as the UH-40 Black Hawk helicopter. When considering buying stock in any conglomerate‚ the potential shareholder must fully understand the corporation and what they are investing in. Looking into United Technologies‚ it is essential to understand that this company
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