Kentucky Fried Chicken and the Global Fast-Food Industry in 1998 PRESENTED TO: MRS. DIONNE MIRANDA LECTURER GALEN UNIVERSITY MBA 680 – STRATEGIC MANAGEMENT PRESENTED BY: Alex Nolberto Audra Kelly Krishna Faber Linda Carballo Mark Banner Nicole McFadzean Mission To sell food in a fast‚ friendly environment that appeals to pride conscious‚ health minded consumers (www.KFC.com). Stated Objectives 1. Product development Increase variety on menu Introduce
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CHAPTER 18 VALUATION AND CAPITAL BUDGETING FOR THE LEVERED FIRM Answers to Concepts Review and Critical Thinking Questions 1. APV is equal to the NPV of the project (i.e. the value of the project for an unlevered firm) plus the NPV of financing side effects. 2. The WACC is based on a target debt level while the APV is based on the amount of debt. 3. FTE uses levered cash flow and other methods use unlevered cash flow. 4. The WACC method does not explicitly include the interest cash
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Sharpe’s Portfolio’ 1. Estimate and compare the returns and variability (i.e. annual standard deviation over the past five years) of Reynolds and Hasbro with that of the S&P 500 index. Which stock appears to be riskiest? Parameters S&P 500 Reynolds (RJR) Hasbro (HAS) Average returns 0.57% 1.87% 1.18% Variance 0.001 0.009 0.007 standard deviation(Risk) 0.036 0.094 0.081 From the table we can say that investing in Reynolds stock is risky. 2. Suppose Sharpe’s position had been 99 percent of equity
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international markets. After a joint venture with Mitsuoishi Shoji Kaisha who assisted franchising the business internationally‚ the business was later acquired by Heublin Inc in 1977. In 1982‚ R. J Reynolds Industries Inc. (RJR) acquired Heublin and merged. After RJR had acquired Nabisco‚ RJR had attempted to redefine itself as a world leader in the consumer foods industry which led to the divestment
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million of debt and $5 million of equity. The interest rate is 8 percent and the marginal tax rate is 35 percent. The debt will be paid off in equal annual installments over the project’s 10-year life. A) Calculate APV. APV = NPV + PV of debt tax shield NPV = PV of cash flows - initial investment Initial Investment 10‚000‚000 Cash flows 1‚750‚000 Period 10 years Discounting rate 12% PV of cash flows 9‚887‚890 using the PV
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normal assumption is that the WACC is the same for each cashflow and each year of the project. These more complicated situations are more easily handled by using Adjusted Present Value (APV). APV is based on the following: APV = NPV of project assuming it is all equity financed + NPV of financing effects Essentially‚ APV breaks the total value of the project into parts: one part is the value assuming no debt is used‚ and then you add on the extra value created from using debt in the capital structure
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END-OF-CHAPTER QUESTIONS AND PROBLEMS QUESTIONS 1. Why is capital budgeting analysis so important to the firm? Answer: The fundamental goal of the financial manager is to maximize shareholder wealth. Capital investments with positive NPV or APV contribute to shareholder wealth. Additionally‚ capital investments generally represent large expenditures relative to the value of the entire firm. These investments determine how efficiently and expensively the firm will produce its product
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Differences between APV and option valuation Valuing MW Acquisition by using APV method assumes in practice that exploiting of all MW’s reserves is certain and happens right after the acquisition. In other words‚ the APV method excludes the flexibility in future decision making. In this case‚ Apache has both an option to defer the exploiting of reserves into future and Apache may also choose not to exploit the MW reserves at all. As some of MW’s reserves are actually real options‚ the APV valuation method
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calculations (expenses are considered in Ch. 4 of the AM note) • Life annuities and Life Insurance benefits are not guaranteed to be paid ‚ so NSP for these benefits depends on probability of receiving the benefit • NSP and APV (Actuarial Present Value) mean the same thing. APV terminology often used to denote that probabilities and interest are involved. 4 AS2053 Feb. 2012 Lecture Notes-AM Note-Chapter 2 Example 1 If j1=8%‚ compare the net single premiums of two products both paying $1‚000
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below are the memorable events of KFC’s history Colonel Sanders’ spirit and heritage are reflected in every aspect of KFC’s brand identity from our world-recognized logo to our world-renowned recipes. In 1986‚ PepsiCo‚ Inc. acquires KFC from RJR Nabisco‚ Inc. . In 2006‚ more than a billion of the Colonel’s "finger licking good" chicken dinners are served annually in more than 80 countries and territories around the world. In 2007‚ KFC proudly introduces a new recipe that keeps the Colonel’s 11
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