Problems/Answers: FIN 534 I have provided the answers to Chapters 6 and 7‚ you are to provide the solutions and explanations‚ namely‚ how were you able to determine the same answers. I want to see‚ how you go about solving these problems. I would encourage you to use the MyFinanceLab and go over the previous Chapters. Keep in mind that these responses are due‚ November 1‚ 2010. I will use your submission to grade you and not the group work that you did in class‚ last Thursday. I trust that you will
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Debt Policy at UST Inc. 1. What are the primary business risks associated with UST Inc.? What are the attributes of UST Inc.? Evaluate from the viewpoint of a bondholder. (Your answer should be more qualitative than quantitative!) The following factors weave into the risks and attributes of the company from the creditors’ point of view: A. UST had seven pending health related lawsuits at the end of 1998. The outcomes of these suits are uncertain. Despite the major Medicaid state settlements
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L1 - Modigliani & Miller (1958) ‘The Cost of Capital‚ Corporation Finance and the Theory of Investment’ This article mainly discusses the cost of capital‚ the required return necessary to make a capital budgeting project worthwhile. Cost of capital includes the cost of debt and the cost of equity. Theorist conclude that the cost of capital to the owners of a firm is simply the rate of interest on bonds. In a world without uncertainty the rational approach would be (1) to maximize profits and (2)
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Question 1 –Cost of Capital (15 marks) a) i) From Annual Report Adjusted net income=$3‚827 million Adjusted EPS=$3.82 Yes‚ shareholders should accept these figures. As mentioned in the annual report‚ management evaluates the components of adjusted net earnings based on an internal assessment of performance measures periodically. The adjusted net earnings enables investors and analysts to better understand the underlying operating performance or the company’s core mining business through the eyes of management
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Study Guide for Final Exam 1. (TCO B) Which of the following statements concerning the MM extension with growth is NOT CORRECT? (a) The tax shields should be discounted at the unlevered cost of equity. (b) The value of a growing tax shield is greater than the value of a constant tax shield. (c) For a given D/S‚ the levered cost of equity is greater than the levered cost of equity under MM’s original (with tax) assumptions. (d) For a given D/S‚ the WACC is greater than the WACC under MM’s
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VALUATION TECHNIQUES Vault Guide to Finance Interviews Valuation Techniques How Much is it Worth? Imagine yourself as the CEO of a publicly traded company that makes widgets. You’ve had a highly successful business so far and want to sell the company to anyone interested in buying it. How do you know how much to sell it for? Likewise‚ consider the Bank of America acquisition of Fleet. How did B of A decide how much it should pay to buy Fleet? For starters‚ you should understand that the value
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for each of the three years for the Sisyphean Corporation’s new project. I ncremental Earnings F orecast Y ear Units Sales (units × $18) Cost of Good Sold (units × $9) Gross Profit Depreciation ($30‚000 / 3) EBIT Income tax at 35% Unlevered net income Add back Depreciation Cash Flows from Operations 1 2‚000 36‚000 18‚000 18‚000 10‚000 8‚000 2‚800 5‚200 10‚000 15‚200 2 2‚200 39‚600 19‚800 19‚800 10‚000 9‚800 3‚430 6‚370 10‚000 16‚370 3 2‚420 43‚560 21
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COMPANY MISSION: As unlevered‚ Lipton is the market leader both‚ in the Uunited Stated of America and around the world. Improve and develop sale stuff within the company. Aim to serve consumers in a unique and effective way Want to target the consumer’s needs everyday Best quality and value for the customers. Want to be on top of every others company. Expand product’s line Want to maintain their sustainable business in the long term. COMPANY OBJECTIVE: A company objective is a goal or outcome
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Paramount Communications Inc. Question 1 Paramount is a takeover target because other firms see synergy value associated with combining Paramount’s assets and operations with their own. Specifically‚ Paramount has several assets that complement other media companies. Value in the media is generated through several different channels. As a media company‚ Paramount has a presence in most of the entertainment sectors (see Exhibit 2). There seems to be a drive toward consolidation and several industry
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Economic value addition by Indian Banks: A study Abstract This research paper studies Indian bank’s profile to demonstrate a direct correlation between the investment in stakeholder relationships and corporate performance. Many Indian banking seems to have destroyed shareholder’s wealth over a period of time and only a few have positively contributed to their wealth. With the help of EVA (Economic Value Added) and MVA (Market Value Added) which tell what the institution is doing with investor’s
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