Name: __________________________________ Lecture Time: Instructor:________________________ 1. In 2008‚ Miles‚ Ana and Cindy‚ who are partners in the MAC Company‚ had average capital balances of $114‚000‚ $98‚000 and $128‚000‚ respectively. The partners share profits and losses by allowing a 12% return on average capital‚ with any remaining income or loss divided in a ratio of 5:3:2. If the company’s income for the current year was $147‚600‚ Cindy’s capital account would increase by: a
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Nike Inc Case Analysis: Nike‚ Inc.: Cost of Capital Monica Mojica FIU Finance 6800 Professor Smith Fall 2011 Table of Contents Problem Statement…………………………………………………………………………… 3 Situation Analysis……………………………………………………………………………... 3 Major Strategic Alternatives…………………………………………………………………...3 Decision Criteria……………………………………………………………………………….. 4 Analysis of Alternatives ………………………………………………………………………
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1 The Value of Synergy Aswath Damodaran Stern School of Business October 2005 2 The Value of Synergy Many acquisitions and some large strategic investments are often justified with the argument that they will create synergy. In this paper‚ we consider the various sources of synergy and categorize them into operating and financial synergies. We then examine how best to value synergy in any investment and how sensitive this value is to different assumptions. We also look at how this synergy value
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Overview The footwear industry is a mature‚ very competitive with low growth and stable profit margins. Active Gear‚ Inc. is a privately held footwear company which is a profitable firm in the industry with $470.3 million revenue in 2006. West Coast Fashions‚ Inc is a large business of men’s and women’s apparel decided to dispose of one of their divisions: Mercury Athletic with $431.1 million revenue in 2006. AGI is very profitable but it is smaller than other competitors‚ which is becoming a competitive
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1. Several factors have made Interco an attractive takeover target: 1) Interco’s stock is undervalued due to poor performance in the apparel and general merchandising divisions‚ which have weakened Interco’s valuation as a whole. 2) As stated by the equity analysts‚ Interco is an over capitalized company with potential to grow‚ which makes an acquisition easy to finance. 3) Interco is also a cash generative target for a potential acquirer as it generates approximately $0.10 of operating cash flow
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inherited in 1951. The company had experienced profitable operations every year since 1932‚ and held approximately a 60-65% market share by 1984. Sales had been increasing annually at about a 7% compound rate‚ and the return on average invested capital was about 20%. The cost structure of the company was 100% equity‚ owned solely by Mr. Case. The capital budget was the leftover earnings generated from internal operations minus the amount Mr. Case wished to withdrawal as income (dividends) for the
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Valuation models Discounted cash flow models: Dividend discount Free cash flow to the firm Residual income Multiples-based valuation: Price-earnings Value-EBITDA Value-EBIT Value-Sales Price-Book value Equity valuation In conjunction with the valuation of Coles Group‚ contained in “Excel03 Equity valuation” Real options valuation Equity markets price shares above the present value of expected future cash flows‚ due to the presence of embedded options not captured by DCF analysis Real
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Decision-which real assets the firm should acquire.Choose positive and greatest NPV.value through CF Financing Decision- how to raise money needed for a firm’s investments in real assets. Choose capital structure to minimize cost of capital‚ maximize value of the firm. value through the cost of capital Valuation adjustments- Time‚ Risk‚ Inflation‚ LiquidityTruncated cash flows: (Time) receive $CFt each period until time T. Constant discount rate 10%. Investment of $100 in time 0. CFs of $22 in t=1 and $121
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total cost of the operating capital. EVA is simply the after-tax operating profit minus the total annual cost of capital. Using EVA has advantages as well as disadvantages. Advantages · EVA sends the message than managers should invest only if the increase in earnings is enough to cover cost of capital · EVA allows a good way for companies to set a reward system that is not overly expensive to implement because is not too difficult for top management to monitor. · EVA makes the cost of capital
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restaurants. However‚ this is a complicated process because finding beta‚ cost of debt‚ and cost of equity in order to find weighted average cost of capital‚ or WACC‚ must be calculated using proxy firms and divisional data. The firm’s use of WACC is directed towards analysis of the company’s future capital investments. Specifically‚ firms use it as a discount rate in determining a projects profitability versus the cost of taking it on. A firm-wide WACC is a beneficial tool for determining whether
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