Managerial Finance BUSI 530 Dr. C. Smith Discussion Board 2 A company’s stock price along with its subsequent perceived valuation is influenced by several factors externally and internally. According to research‚ business valuation is defined as: “A process and a set of procedures used to determine the economic value of an owner’s interest in a business. Business valuation is often used to estimate the selling price of a business‚ resolve disputes related to estate and gift taxation‚ divorce litigation
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1) Why is Flagstar in financial distress? When possible‚ back your claims with data. Signs of financial distress • The company lost money almost every year since its leveraged buyout by Coniston Partners in 1989. The income generated was not sufficient to service the interest expenses of the company which stood at $2.62B in 1996. From Exhibit 1‚ we can say that interest coverage ratio computed as EBIT / Interest Expense was 1.31 in 1989 and has been decreasing over years and currently stands at
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that “reasonably” values the underlying stock of the company as the fair market value (FMV) of the stock at the time of grant. Rule of thumb: At every instance a close corporation grants stock options‚ there should be a “reasonable” and valid FMV valuation of the company’s common stock upon which such grants are based. Rationale for the 2004 Enactment – Enron and Section 409(A) In the many ways that Enron taught us about corporate malpractice that had long been unregulated‚ Enron also shed valuable
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BUS 3303 Finance Course review Ale Previtero AGENDA 1. Overview of valuation cases 2. WACC • Cost of equity‚ choosing beta‚ choosing weights‚ when to use premium. 3. Valuation using Discounted Cash Flow (DCF) • Key assumptions‚ Terminal Value‚ sensitivity 4. Valuation using multiples • Key points‚ pros & cons‚ choosing comparable firms • Which multiple? Which year? Example. 5. Financing an Acquisition • Determine price. Financing. Making a decision. 6. Final exam
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important consideration when using the DCF approach to valuation is its validity and usefulness in valuing companies and their stock prices. Various studies have established that a strong correlation between estimated future cash flows and the value of a firm exists (Copeland et al‚ 1994 ; Brealey and Myers ‚ 2000; Jones‚ 1998 ). In their study of 51 highly leveraged transactions (HLTs) ‚ Kaplan and Ruback (1995) found that the valuations using the DCF methods are within 10%‚ on average‚ of the
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Income Securities Dr H. K. Pradhan Objectives: This course is intended to analyze the fixed income securities markets and its implications for investments. It will analyze the market characteristics‚ instruments‚ selling techniques‚ pricing and valuation issues‚ floating rate instruments‚ risk and return of fixed income securities‚ portfolio management techniques‚ term structure modeling‚ corporate debt and convertibles‚ bonds with embedded options‚ sub-national debt analysis‚ credit risk analysis
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Management is about how these Investment and Financing decisions should be made. This course explores the first part of Financial Management and introduces the framework‚ tools and techniques for making Investment decisions. Specifically‚ we will cover Valuation‚ Capital Budgeting‚ Modern Portfolio Theory and Equilibrium Risk-Return Relationship. GRADING: |Quizzes (3) |15% | |Midterm |30% | |Final
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When attempting to determine the valuation of LinkedIn it helps to understand some of the issues involved. The most accurate way to value a stock’s price is using discounted cash flows. The problem with this approach is that it is nearly impossible to predict with any accuracy what the long-term cash flows are for a given company; especially a company that is young or that might be using an innovative and new business model. Additionally‚ knowing what long-term cash flows look like requires knowledge
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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 actually
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Market Information Lab CIQ202 PREREQUISITES • Capital IQ 101 – Tearsheets – Screening – Formula Builder – Excel Plug-in January 31‚ 2012 © Margolis Market Information Lab CIQ202 AGENDA • Mergers and Acquisitions • • • Valuation Capital IQ Screening Applications of Capital IQ Screening January 31‚ 2012 © Margolis Market Information Lab CIQ202 MERGERS AND ACQUISITIONS • Mergers and acquisitions significantly influence financial markets – Deals can range from
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