ACF: CONGOLEUM CORPORATION Summary Congoleum Corporation has three product market segments: home furnishings‚ shipbuilding and automotive and industrial distribution. In 1979‚ First Boston Corporation bid for an LBO of Congoleum for a price per share of $38. The purpose of this analysis is to assess Congoleum as a LBO candidate and determine whether the offer made by First Boston Corporation is fair. 1. Is Congoleum a good LBO candidate? In other words‚ does this company have a lot of debt
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To : President‚ Marriott Corporation From : FLO299 Subject : Marriott Corporation – The Cost of Capital Date : April 6‚ 2010 The Importance of the Cost of Capital The cost of capital is important as it forms the basis for Marriott’s investing and financial decisions. By understanding and knowing the cost of capital‚ Marriott is able to select relevant investment projects for the company‚ determine incentive compensation‚ and repurchase undervalued shares when needed. The returns
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Managerial Finance MSc21 Sergio Paya CLASS 1 CLASS 2 CLASS 3 CLASS 4 CLASS 5 CLASS 6 CLASS 7 CLASS 8 CLASS 9 WRAP-UP CLASS 2 4 6 7 11 13 16 19 23 27 1 Managerial Finance MSc21 Sergio Paya Class 1 1 – Finance 2 - BVD – FVD – value creation ( Financial value drivers – Business value drivers) 3 - Strategy and industry 4 - Shareholder value creation vs triple P What is finance? Shareholders give equity capital once Hardly ever they make new shares‚ like for example: When the company
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Solutions to Lectures on Corporate Finance‚ Second Edition Peter Bossaerts and Bernt Arne Ødegaard 2006 LECTURES ON CORPORATE FINANCE - (Second Edition) © World Scientific Publishing Co. Pte. Ltd. http://www.worldscibooks.com/economics/6188.html Contents 1 Finance 2 Axioms of modern corporate finance 3 On Value Additivity 4 On the Efficient Markets Hypothesis 5 Present Value 6 Capital Budgeting 7 Valuation Under Uncertainty: The CAPM 8 Valuing Risky Cash Flows 9 Introduction to derivatives
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CHAPTER ONE INTRODUCTION 1.1 BACKGROUND TO THE STUDY This study analyses the effect of the agency theory and accounting choice usually been made by managers of Nigeria listed companies. It (agency theory and accounting choice) can be demonstrated in the modern day companies where management is usually separated from the ownership of business. The professional managers are supposed to make decisions and take actions that are consistent with the objective of maximising shareholders wealth. But this
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Capital Asset Pricing Model (CAPM) Versus the Discounted Cash Flows Method Managerial Analysis/BUSN 602 Capital asset pricing model or CAPM is a financial model that measures the risk premium inherent in equity investments like common stocks while Discounted Cash Flow or DCF compares the cost of an investment with the present value of future cash flows generated by the investment with the mindset being that if the cash flow is positive‚ then the investment is good. Generally speaking‚ CAPM is
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long-term corporate bonds‚ long-term government bonds‚ U.S. Treasury bills Instructor Explanation: This is found at the top of page 257 of the book. Points Received: 5 of 5 Comments: 15. Question: Apex Roofing’s stock has a beta of 1.50‚ its required return is 14.00%‚ and the risk-free rate is 5.00%. What is the required rate of return on the stock market? (Hint: First find the market risk premium.) Your Answer:
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costs and taxes that it pays. The firm can hedge by buying/selling forward contracts on gold. Start by assuming that bankruptcy costs are zero. (a) Find the value of the unhedged unlevered firm. (10 points) Answer: 1 · [350 − 0.5 · 0.4 · (500 − 300)] = 295.238. Value of firm = 1.05 (b) Find the value of the hedged unlevered firm. (10 points) Answer: 1 Value of firm = · [350 − 0.4 · (350 − 300)] = 314.286. 1.05 (c) Find the value of the unhedged firm if it issues an optimally chosen quantity of safe debt
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calculated for various D/V ratios 3. Terminal Value of the firm was determined using P/E Multiple of 19.1 4. Valuation done for the cash flows and terminal value at a discount rate corresponding to industry average D/V Ratio 5. APV determined using the unlevered equity discount rate and the debt rate. Interest tax shield considered accordingly 6. Steps 1-5 repeated for firm with synergy and value determined. Key Issues that have been faced are the following a. Valuations of Cash flows 1. Determining the
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2 Exercise 2 Gibson‚ Inc.‚ expects perpetual earnings before interest and taxes of $1.2 mil. per year; the firm’s pre-tax cost of debt is 8% p.a.‚ and its annual interest expense is $200‚000; the company analysts estimate that the unlevered cost of Gibson’s equity is 12%; Gibson is subject to a 35% corporate tax rate. What is the value of this firm? If there are no costs of financial distress or bankruptcy‚ what percentage of the firm’s capital structure would be financed
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