Principles of Managerial Finance FIN/419 P12.4 Break even analysis. Barry Carter is considering opening a music store. He wants to estimate the number of CDs he must sell to break even. The CDs will be sold for $13.98 each‚ variable operating costs are $10.48 per CD‚ and annual fixed operating costs are $73‚500. A) Find the operating breakeven point in number of CDs. Q= FC / P- VC Q= 73‚500 / 13.98 – 10.48 Q= 21‚000 CDs B) Calculate the total
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his current situation at another employer – Current responsibilities include • Shareholder reporting: one individual • Capital budgeting: major capital expenditure program just completed – Harrington facilities the most modern in the industry‚ excellently maintained • Financial forecasting and planning: level production; 98% re-order rate for product • Working capital management: pay cash for all orders when due • Debt issuance: two unutilized $1M lines of credit • Equity issuance and
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Objective of the study The primary objective of the study is to gain practical insights of the business world. Case analysis truly fulfills this objective. It is one of the most general and applicable methods of analytical thinking‚ depending only on the division of a problem‚ decision or situation into a sufficient number of separate cases. The derived objectives of this particular case study of ‘Zimmer Holdings (A): Acquisition of Centerpulse‚ Switzerland’ are the following: * To ascertain
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1. CORPORATE GOVERNANCE Objective of corp finance: maximize firm value. Narrower objective of maximizing stockholder wealth; when stock is traded and markets are viewed to be efficient‚ objective is to maximize stock price. A. Stockholder interests vs management interests In theory: stockholders have significant control over management. Mechanisms for discipline: Annual meeting and BOD In Practice: Most stockholders do not go to meetings since cost of going exceeds the value of their holdings; incumbernt
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Weighted Average Cost of Capital (WACC) Calculations The weighted average cost of capital (WACC) is the discount rate used in the discounted cash flow analysis. Usually‚ the WACC is the weighted average of the cost of debt (Kd) and the cost of equity (Ke)‚ since debt and equity are the most common sources of funds for the companies. In general‚ the formula for WACC is the following: As implied by the formula itself‚ if a company does not have interest-bearing debts‚ then its WACC would equal
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DELUXE Corporation Teaching Note Synopsis and Objectives Suggestions for complementary cases in capital structure choice and financial flexibility: “The Wm. Wrigley‚ Jr. Company: Capital Structure‚ Valuation‚ and Cost of Capital‚” (Case 34); “Rosario Acero S.A.‚” (UVA-F-1211); “Gainesboro Machine Tools Corporation‚” (Case 26) In July 2002‚ an investment banker advising Deluxe Corporation must prepare recommendations for the company’s board of directors regarding the firm’s financial
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decisions in a corporation‚ including investing‚ financing and working capital management decisions. COURSE CONTENTS: This course provides basic concepts of the time value of money‚ valuation and rates of return‚ cost of capital and capital budgeting. Students will learn about how capital markets function‚ about different types of securities and financing instruments that exist‚ and about how to manage cash flows. Also‚ risk‚ working capital management‚ leverage‚ forecasting‚ and the analysis of financial
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debt in exhibit 3? 2. How much potential value‚ if any‚ can AHP create for its shareholders at each of the proposed levels of debt? 3. What capital structure would you recommend as appropriate for AHP? What are the advantages and disadvantages? 4. How might AHP implement a more aggressive capital structure policy? What are the alternative methods for leveraging up? Case 2: Dividend policy at FPL Group (Week 10 – not final) 1. What
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alternative actions by management would have reduced the severity of Massey’s financial difficulties? 8) If you were Deere in 1981‚ what strategy would you pursue? 9) Summarize this case by explaining why the capital structure decision mattered so much in this industry. Capital structure case: Massey-Ferguson Ltd (1980) This case seeks to discuss the determination of a target debt policy consistent with business risk and competitive risk‚ exploring the difficulties encountered by a firm with
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traded at a discount to comparable companies‚ as its management believed‚ we can simply apply multiple which comes from the average multiple of its comparable companies. Considering fluctuation of future after-tax earnings caused by the change in capital structure‚ we prefer to use TEV/EBITDA multiple in this case. Amtelecom Group consists of two lines of business which has to been taken into consideration. We separately calculate the value of both companies and their summation. In this way‚ we get a relative
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