| | | WACC | | | | Levered vs. Unlevered Beta | | μ = x̄ = E(x) Mean | n = number | CF = P = Cashflow or Payment | fi = rel. freq | = Sum of a series | T = time | xi = middle point | ρ = Correlation | k = r = interest rate | W = combined linear func | = Standard Deviation | g = growth | 2 = Variation | ɑ = E = Margin of Error | rp = Risk of Portfolio | p0 = proportion of hypothesis | β = Beta coeffic. of portfolio | rf = Risk Free Rate
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Modeling Copyright 2008 © by Wall Street Prep‚ Inc. ***************************** SAMPLE PAGES FROM TUTORIAL GUIDE ***************************** Table of contents SECTION 1: OVERVIEW DCF in theory and in practice Unlevered vs. levered DCF SECTION 2: MODELING THE DCF Modeling unlevered free cash flows Discounting to reflect stub year and mid-year adjustment Terminal value using growth in perpetuity approach Terminal value using exit multiple approach Calculating net debt Shares outstanding using
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California at Berkeley Lisa R. Goldberg‡ MSCI and University of California at Berkeley November 10‚ 2011§ Abstract We gauge the return-generating potential and risk inherent in four investment strategies: value weighted‚ fixed mix‚ and levered and unlevered risk parity‚ over an 85-year horizon. There are three essential conclusions from our study. First‚ even over periods lasting decades‚ the specific start and end dates of a backtest can have a material effect on the results; second‚ transaction costs
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Forthcoming Journal of Applied Finance‚ Financial Management Association The Exxon-Mobil Merger: An Archetype J. Fred Weston* The Anderson School at UCLA University of California‚ Los Angeles jweston@anderson.ucla.edu February 26‚ 2002 Fred Weston is Professor of Finance Emeritus Recalled‚ the Anderson School at the University of California Los Angeles. Thanks to Matthias Kahl‚ Samuel C. Weaver‚ Juan Siu‚ Brian Johnson‚ and Kelley Coleman for contributions. The paper also benefited from
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facilitate the cusses of CPK? 2. Using the scenarios in case Exhibit 9‚ what roles does leverage play in affecting the return on equity (ROE) for CPK? What about the cost of capital? a. Leverage increases Beta for the firm since debt to equity ratio increases from unlevered beta. We use 10 year Treasury bond as our risk free rate and for market risk premium we use current prime lending rate for June 2007 minus10 year TRSY bond. Using these assumptions with increase in Debt‚ cost of equity
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value-based information on the most comparable sodium chlorate producers (i.e. Brunswick Chemical and Southern Chemicals who specialize in producing sodium chlorate) are obtained to estimate the appropriate unlevered beta for Collinsville at 1.09. As a result‚ Collinsville’s estimated relevered beta is 1.39. Re = 9.5% + (1.39 * 7.25%) = 19.57% Tax Rate: From the perspective of Dixon Corporation‚ the cost of capital evaluation would start out in
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1. Do you think Mercury is an appropriate target for AGI? Why or why not? Mercury is an appropriate target for AGI. AGI is looking to increase its revenue and profit by utilizing synergies. The initial aim of AGI for acquiring Mercury Athletics is to increase leverage with contract manufacturers and to boost the cooperation with the retailers and distributors. AGI was one of the most profitable and successful companies in the market segment‚ but the firm’s size remained rather small in comparison
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president of project finance at Marriott Corporation‚ is preparing his annual recommendations for the hurdle rates for each of Marriott’s three divisions: lodging‚ contract services‚ and restaurants. However‚ this is a complicated process because finding beta‚ cost of debt‚ and cost of equity in order to find weighted average cost of capital‚ or WACC‚ must be calculated using proxy firms and divisional data. The firm’s use of WACC is directed towards analysis of the company’s future capital investments
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Question 1 Railroading industry overview: The Railroad revolution in the United States began in the early 1800s. The developed infrastructure was used for freight transportation business. In the mid-1800s the industry experienced explosive growth‚ followed by significant consolidation in 1870. The rail road companies initiated expansion through acquisitions in attempt to reduce marginal costs and increase their market share. As a result of this competition‚ a number of cartels were formed; therefore
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PAU/LBS/2011/10/024 FINANCE - 2 EXAM ANALYSIS OF JET BLUE CASE: PREPARING FOR FINANCING SYNOPSIS OF THE CASE JetBlue Airways Corporation was formed in August 1998 as a low-fare‚ low-cost but high service passenger airline serving select United States market. JetBlue’s operations strategy was designed to achieve a low cost‚ whilst offering customers a pleasing and differentiated flying experience. JetBlue has had a successful business model and strong financial results during that period‚ and
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