FINS3625 APPLIED CORPORATE FINANCE Case Study Written Report Week 8 Valuation: Laura Martin Name Student Number % Contributio n 20 20 20 20 20 Signature Karen Chan Yifeng Chen (Nino) Tony Richardson Weitao Wu (Tony) Wendy (Wenyu) Yan z3242429 z3283995 z3253113 z3284666 z3241580 1 Multiples versus DCF analysis Multiples analysis is simple to understand and apply. The inputs for the multiple are publicly available‚ though are vulnerable to accounting manipulation. Also
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estimated investment grade debt rating of A. In the last scenario‚ the group reviewed the current unlevered capital structure with no debt. In this case the WACC is 10.11%. Figure 1 (on page 2) provides a summary of the relevant financial ratios under each level of debt along with the corresponding rating range and estimated cost of debt. Furthermore‚ Figure 2 (on page 2) presents a recap of Wrigley’s beta‚ cost of equity‚ cost of debt‚ and
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Pinkerton Group Project Executive Overview The security guard services industry consisted of two segments: proprietary guards and contract guards. The historical growth was driven by companies realizing‚ that contracting guards allowed them gain operating flexibility instead of managing their own security personnel. In 1987 security guard services was a $10 billion industry growing at 6% a year. Due to the industry being very mature‚ fragmented‚ and price competitive there was an ongoing
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Cases Each student must turn in any two of the four cases. The due date for each case is different. For whichever cases you select‚ submit your answers on paper (an Excel printout is fine) by the due date. Also be prepared to explain your answer to the case for the class on the evening of the due date (after the lecture). Bring your Excel file to class on a flash drive or laptop. Case 1 – Time Value of Money Due Date: 2/13/2013 There are two people: Joe Spender and Bill Saver.
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effect on expected ROE‚ expected EPS‚ and the risk borne by stockholders. • Briefly explain what is meant by a firm’s optimal capital structure. • Specify the effect of financial leverage on beta using the Hamada equation‚ and transform this equation to calculate a firm’s unlevered beta‚ bU. • Illustrate through a graph the premiums for financial risk and business risk at different debt levels. • List the assumptions under which Modigliani and Miller proved that a firm’s
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credit will be given. If you run out of space use the back of the page to complete your answer. Good Luck! Section 1- Multiple Choice- Circle the single best answer to each question 1. If an investor purchases shares in an unlevered firm and borrows on their own account to purchase some of these shares‚ the investor is pursuing the ______________ strategy. (a) milking the property (b) homemade leverage (c) excessive risk taking (d) Enron 2. Which of the following are
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CHAPTER 26 MERGERS‚ LBOs‚ DIVESTITURES‚ AND HOLDING COMPANIES Please see the preface for information on the AACSB letter indicators (F‚ M‚ etc.) on the subject lines. True/False Easy: (26.1) Synergistic merger FU Answer: a EASY 1. In a merger with true synergies‚ the post-merger value exceeds the sum of the separate companies’ pre-merger values. a. True b. False (26.1) Sources of synergy FU Answer: a EASY 2. Synergistic benefits can arise from a number of different
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Asset Comparable Companies: Market Value Debt Value Equity Beta Beta Universal Mobile 118 497 69 130 36‚8% 58‚3% 0‚86 0‚64 Neuberger Wireless 189 470 79 351 29‚5% 41‚9% 0‚89 0‚71 Agile Connections 21 079 5 080 19‚4% 24‚1% 1‚17 1‚02 Big Country Communications 26 285 8 335 24‚1% 31‚7% 0‚97 0‚81 Rocky Mountain Wireless 7 360 3 268 30‚7% 44‚4% 1‚13 0‚89 Average 72 538 33 033 28‚1% 39‚1% 1‚00 0‚82 Re-levering the asset beta on the constant capital
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by her promotion and the reliance on her calculations. However‚ her cost of equity numbers were used as a starting point and manipulated rather than used as presented. Examining the calculation of the firms weighted average cost of capital and betas as well as comparing with others in the same type of industries indicates that assumptions should be changed for the project being analyzed. Consideration of debt‚ equity‚ and costs must be given for the specific project while being mindful of company
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and pecking order‚ and uncertainty of operating income D. Taxes‚ asset types‚ and uncertainty of operating income E. None of the above. 3. Using the CAPM to calculate the cost of capital for a risky project assumes that: A. using the firm ’s beta is the same measure of risk as the project. B. the firm is all-equity financed. C. the financial risk is equal to business risk. D. Both A and B. E. Both A and C. 4. Your corporation has a Book Value of long-term debt = $1‚000‚000. The
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