...financial impact of this increased competition will be analyzed. Analysis of External Financing Needs for MCI from 1983 to 1989 Please see Exhibit 1 and Exhibit 2 MCI’s external needs will keep increasing over the next few years as the operating margins would shrink because of higher competition & higher access charges. In order to increase its market share, MCI would need to continue investing huge capitals in its network. As per exhibit 9 of the case, it is anticipated that MCI will increase its market share to 20 % in the next 6 years. The telecom industry is very capital intensive and in 1983 required $1.15 worth of investment in fixed plant & equipment for each extra $1 of revenue; that is first you have to build the network before you can sign up customers. The operating margin is expected to stabilize at 15% by 1990. But they are expected to vary substantially based on competition. It can go up to 22% or go down to 8%. Types of securities which were issued by MCI (1972-1983) 1. 2. 3. 4. 5. Common Stock Common Stock with warrant Convertible cumulative preferred stock - Cost Around 12.27 Debentures – Cost around 15% Convertible debenture – cost around 10% MCI initially issued equity in 1972 and later it started issuing debentures & convertible debentures. This was because the cost of equity is highest. MCI relied on debentures for a while and then convertible debentures which had lower cost of capital. As its equity stock price continued rising, it converted the convertible...
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...financial impact of this increased competition will be analyzed. Analysis of External Financing Needs for MCI from 1983 to 1989 Please see Exhibit 1 and Exhibit 2 MCI’s external needs will keep increasing over the next few years as the operating margins would shrink because of higher competition & higher access charges. In order to increase its market share, MCI would need to continue investing huge capitals in its network. As per exhibit 9 of the case, it is anticipated that MCI will increase its market share to 20 % in the next 6 years. The telecom industry is very capital intensive and in 1983 required $1.15 worth of investment in fixed plant & equipment for each extra $1 of revenue; that is first you have to build the network before you can sign up customers. The operating margin is expected to stabilize at 15% by 1990. But they are expected to vary substantially based on competition. It can go up to 22% or go down to 8%. Types of securities which were issued by MCI (1972-1983) 1. 2. 3. 4. 5. Common Stock Common Stock with warrant Convertible cumulative preferred stock - Cost Around 12.27 Debentures – Cost around 15% Convertible debenture – cost around 10% MCI initially issued equity in 1972 and later it started issuing debentures & convertible debentures. This was because the cost of equity is highest. MCI relied on debentures for a while and then convertible debentures which had lower cost of capital. As its equity stock price continued rising, it converted the convertible...
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...Effectiveness! Liquidity!and! Leveraging! Market!Ratio! DCR! S&P500! EV/EBITDA:!12.6! ! ! Undervalued! Share!Price! Advanced! Technology!! Attractive! New! Products! Significant! Market! Share! ! ! Trading(Comparable BCR Enterprise!Value!/!LTM!Rev Enterprise!Value!/!LTM!EBITDA 3.0x 10.1x! BSX 2.15x 9.48x! BDX 2.67X 9.9X! TMO 2.88x 13.76x! Transaction(Comparable((Medical(Device(Industry Date!Range! Total!Number!of!Deal! Total!Transaction!Value! Median!EV/EBITDA EBITDA!range 5/11/2012!–!5/11/2013 217 $8.51!Billion 12.78x 0.0x!–!64.34x COMPARABLES!VALUATION! • Trading!Comparable:!13x! • Implied!EV:!!$11.55!Billion! • Implied!Share!Price:!137.17! • Premium:!31.13%! ! ! DCF(ANALYSIS With( Synergies( Without( Synergies( LBO(ANALYSIS PE(Firms(–(( General PE(Firms(O( Professional !!Enterprise!Value! $!11.57!Billion! $10.85!Billion! !!Enterprise!Value !!Equity!Value! $!11.05!Billion! $10.34!Billion! !!Equity!Value !!Implied!Price! !$137.34! $128.43! !!Purchase!Price! !!Current!Share!Price! !$104.61! $104.61! !!Price!Premium 31.29%( 22.77%( !!IRR !!Price!Premium! $!11.15!Billion $!11.23!Billion $!10.52!Billion $!10.61!Billion !$130.76! !$131.81! 25%! 26%! (16% 18%( Conclusion:! •...
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...Proposal for Research On Capital Structure Determinants of the Pharmaceutical Companies in Bangladesh: A study in Incepta pharmaceutical Company Limited. Mirpur Cantonment, Dhaka-1216 Proposal for Research On Capital Structure Determinants of the Pharmaceutical Companies in Bangladesh: A study in Incepta pharmaceutical Company Limited. Prepared for Md. Sawkat Ali Lieutenant Colonel Internship Supervisor Faculty of Business Studies Prepared by |Ronald Halder | |ID – M 0910013 | |M.B.A 10th batch | Mirpur Cantonment, Dhaka-1216 September 19, 2010 December 19, 2010 Md. Sawkat Ali Lieutenant Colonel Internship Supervisor Faculty of Business Studies Bangladesh University of Professionals Mirpur Cantonment, Dhaka-1216. Dear Sir: Subject: Submission of Proposal for research on “Capital Structure Determinants of the Pharmaceutical Companies in Bangladesh: A study in Incepta pharmaceutical Company Limited”. Here I developed a proposal on “Capital Structure Determinants of the Pharmaceutical Companies in Bangladesh: A study in Incepta pharmaceutical Company Limited”. The proposal will focus on the steps of research through several variables. The main findings of the research will be to find out the determinants of capital structure and find the most vital one through statistical analysis and interpretation. I highly appreciate you for creating such opportunity...
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...(Weighted average cost of capital) The target capital structure for QM Industries is 45% common stock, 6% preferred stock, and 49% debt. If the cost of common equity for the firm is 17.9%, the cost of preferred stock is 10.6%, the before-tax cost of debt is 8.9%, and the firm’s tax rate is 35%, what is QM’s weighted average cost of capital? QM’s WAAC is _%? 2).(Weighted average cost of capital)Crypton Electronics has a capital structure consisting of 45% common stock and 55% debt. A debt issue of $1,000 par value, 6.1% bonds that mature in 15 years and pay annual interest will sell for $980. Common stock of the firm is currently selling for $29.76 per share and the firm expects to pay a $2.29 dividend next year. Dividends have grown at the rate of 5.3% per year and are expected to continue to do so for the foreseeable future. What is Crypton’s cost of capital where the firm’s tax rate is 30%? Crypton’s cost of capital is _%? 3). (Weighted average cost of capital)The target capital structure for Jowers Manufacturing is 51% common stick, 18% preferred stock, and 31% debt. If the cost of common equity for the firm is 19.3%, the cost of preferred stock is 12.9% and before-tax cost of debt is 10.4%, what is Jowers’ cost of capital? The firm’s tax rate is 34% Jowers’ WACC is _% 4).(Weighted average cost of capital) As a member of the finance Department of Ranch Manufacturing, your supervisor has asked you to compute the appropriate discount rate to use when evaluating the purchase...
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...JET2 Financial Analysis Task 1 Competition Bikes, Inc. Submitted by: Michelle Beacham Competition Bikes, Inc. is a manufacturer of bicycles for professional and other highly accomplished riders. The bicycle produced is a light weight, shaft driven bicycle that is custom made to fit each cyclist. It has been extremely popular among professional riders; however, recently sponsors have reduced funding to the riders causing a decline in sales volumes. This summary will be evaluating the strengths and weaknesses of the Competition Bikes, Inc., analyzing the working capital of the company, evaluating the internal controls, and Competition Bikes’ compliance with the Sarbanes-Oxley Act. Evaluation of the strengths and weaknesses The first evaluation of strengths and weaknesses of Competition Bikes, Inc. will be a horizontal analysis of the income statement and balance sheet. A horizontal analysis is a comparison of financial information across a particular time period. A comparison of the periods is completed based on a historical base period. For instance, we could compare sales for the current year as compared to the prior year. Each significant variance is investigated to determine the cause of the fluctuation (Accounting Tools, 2015). Gross profit is the difference between “Net Sales” and “Cost of Goods Sold”. Gross profit is up 37.5% in year 6 with a significant decline of 16.3% in year 7. The decline in year 7 is directly attributable to the decline in sales...
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...Business Policy & Strategy Date: -------------- Final Project (WAC) University of Central Punjab Course Instructor: Farooq Omar Semester: ------------------ Section: -------- Group - Names: > Business Plan (type in trading name) (type in address) (address continued) (telephone number) (email address) -YOUR BUSINESSS LOGO - Prepared (date) Purpose of the business plan Explain why you are writing the plan: is it to secure finance, a management tool, or an operational guide for the business Start-up? If the plan is intended to support an application for finance, state the name of the bank or other financier to whom the application is being made, the amount of finance being applied for, the term of the loan and the security you’ll be providing the bank. State what the loan will be used for and how it will be repaid: eg from additional revenue generated as a result of borrowing the money. Also remember to date the plan and note the author. Summary Although it appears at the beginning of the plan, the summary is usually written last. It provides a broad overview of your business and what distinguishes your products or services from...
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...MULTINATIONAL COST OF CAPITAL AND CAPITAL STRUCTURE LEARNING OBJECTIVES The specific objectives of this chapter are to: l explain how corporate and country characteristics influence an MNC’s cost of capital, explain why there are differences in the costs of capital among countries, and explain how corporate and country characteristics are considered by an MNC when it establishes its capital structure. l l An MNC finances its operations by using a mixture of fixed interest borrowing and equity financing that can minimize the overall cost of capital (the weighted average of its interest rate and dividend payments). By minimizing the cost of capital used to finance a given size and risk of operations, financial managers can maximize the value of the company and therefore maximize shareholder wealth. 25 26 MULTINATIONAL COST OF CAPITAL AND CAPITAL STRUCTURE BACKGROUND ON COST OF CAPITAL Apart from working capital, a firm’s capital consists of equity (retained earnings and funds obtained by issuing shares) and debt (borrowed funds). With these funds a firm invests in a portfolio of projects, each project potentially offering different risks and different returns. The interest rate that the firm applies or charges to these projects (the cost of using the firm’s capital) will therefore vary according to the project’s particular risk. Profitable investment in this context is where the firm invests in projects that achieve returns greater than that required by their risk. A project...
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...Assignment Sheets, and Course Outline The Case Method - Rules for Classroom Discussion Instruction for the Formation of Study & Project Groups B. Professor/Student Introductions C. Readings from Course Packet: 1. Fin 394.4 Syllabus - Course Outline and Grading Policy 2. “Course Introduction” 3. Note to the Student: How to Study and Discuss Cases 4. “The Case Method” - Jeff Sandefer 5. “Classroom Discussion” - Jeff Sandefer 6. “Note on Study Groups” - Jeff Sandefer ASSIGNMENT: 1. PURCHASE THE COURSE PACKET 2. BRING YOUR RESUME TO THE NEXT CLASS 3. BROWSE THE CLASS BLACKBOARD SITE: (HTTP://COURSES.UTEXAS.EDU/) AND LOOK AT THE EXTERNAL LINKS AND COURSE DOCUMENTS POSTED. a. Case Exhibits b. Case Solutions c. Valuation Templates d. Valuation External Links e. Project Information ASSIGNMENT SHEET THURSDAY, JANUARY 19, 2012 CLASS 2 – WORK FOR MONEY OR MONEY WORK FOR YOU? A. Turn in Resume B. Form study groups (self-select 4-6 people with different education, concentration, work experience and cultural background). Send e-mail to the professor with team member’s names. Study teams members must be in same section of the class. C. If you plan to do a consulting project, then start forming a team of four (4) members and looking...
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...TABLE OF CONTENT ACKNOWLEDGEMENTS 2 1. COLEMAN SYSTEM BACKGROUND INFORMATION 4 2. COST OF CAPITAL FOR COLEMAN SYSTEMS 5 2.1 Calculate cost of debt (rd) 5 2.2 Calculate ratio debt/capital and equity/capital in market value terms 6 2.3 Calculate Beta (β) for Coleman Systems 8 2.4 Calculate Cost of Equity 10 2.5 Calculate the weighted average cost of capital for Coleman Systems 10 3. THE WACC AND PROJECT VALUES FOR DIFFERENT DEBT – EQUITY RATIOS AND THE OPTIMAL CAPITAL STRUCTURE FOR THE PROJECT 11 3.1 Case 1: No bankruptcy risk without tax 11 3.2 Case 2: No bankruptcy risk with tax 13 3.3 Case 3: With bankruptcy risk with tax 15 4. DISCUSSION ON AGENCY AND SIGNALLING EFFECT 18 5. REPLACEMENT PFOJECT 21 5.1 Replacing Machine A with Machine B 21 5.2 Replacing Machine A with Machine C 26 6. UNDERTAKE A SENSITIVITY ANALYSIS FOR THE TWO PROJECTS. 31 REFERENCES 34 SEMESTER 2013 CORPORATE FINANCE–BMCF5103 ASSIGNMENT (60%) 1. COLEMAN SYSTEM BACKGROUND INFORMATION Coleman Systems is a private manufacturing company that makes electrical components. We have the following information about Coleman, as well as three listed companies in the electronics industry. |Term |Coleman |Skye |Allied |Foust | |Book value of assets (£m) ...
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... on Mon. and Wed/. or by Appointment I. Teaching Objectives Financial decision making cases are used to… • Create a highly interactive learning environment; • Learn about the application of financial management and credit analysis concepts; • Discover what you do not know about the practice of financial management; • Show what you have learned; • Highlight the relationships between strategic goals and the creation of firm value; • Develop techniques for interpreting a firm’s financial data and strategic plans; • Enhance your critical thinking and problem solving skills; • Expand your understanding of financial theory and its application; • Improve your listening and cooperative learning skills. II. Learning Promises At the end of this course your will be able to… • Think like a financial manager; • Interpret a company’s financial health by evaluating the performance of its cash flow components and financial ratios; • Create financial forecasts with different scenarios; • Justify the acceptance or rejection of a loan based on credit analysis: • Learn to interpret loan covenants and the underlying collateral; • Discover the metrics that Moody’s uses to identify credit risk changes; • Explain how management...
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...worth pursuing. The current hurdle rate of 10% should be re-evaluated by finding the weighted average cost of capital (WACC). Then by forecasting the cash flows of each project and discounting them by the WACC to find the net present value, or by solving for the internal rate of return, we should be able to see which projects Star should undertake. Conclusion: After calculating the NPV and the IRR for each project, I have determined that both the dishwasher and the trash compactor projects should be pursued. Both of them have shown positive NPVs at the new discount rate of 11.58% (WACC). Both projects also yielded IRRs greater than the given hurdle rate. The disposal did not meet these requirements and therefore should not be undertaken. Based on the optimal capital structure analysis, they should pursue as 70% debt proportion, which will give them the lowest cost of capital at 11.58%. Currently Star has no debt in their capital structure, so these new projects should begin to add debt to the company. However, no matter what debt and equity proportions are chosen for each project, the discount rate of 11.58% should be used, as the capital budgeting decisions should be independent of the financing decisions. Cost of Capital: Current Capital Structure Gordon Growth Model: (Re = Div Yield + g) I first solved for the dividend yield by using the equation of next year's dividend divided by this year's stock price. The current year is 1979, so from Exhibit 3 the 1980 dividend...
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...Accounting and Finance for Managers LESSON 7 FUND FLOW STATEMENT ANALYSIS CONTENTS 7.0 7.1 Aims and Objectives Introduction Meaning & Objectives of Fund Flow Statement Analysis Methods of Preparing Fund Flow Statement 7.3.1 Schedule of Changes in Working Capital 7.3.2 Net Profit Method 7.3.3 Sales Method 7.3.4 First Method 7.3.5 Second Method 7.4 Advantages of Preparing Fund Flow Statement 7.4.1 Illustrative Statement of Financing 7.4.2 To fulfil the Primary Objective of the Financial Management 7.4.3 Facilitation through Financial Planning 7.4.4 Guide to Working Capital Management 7.4.5 Indicator of Yester Track Path of the Firm 7.5 Let us Sum up 7.6 Lesson-end Activity 7.7 Keywords 7.8 Questions for Discussion 7.9 Suggested Readings 7.0 AIMS AND OBJECTIVES In this lesson we shall discuss about fund flow statement analysis. After going through this lesson you will be able...
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...FINANCIAL MANAGEMENT AND POLICIES FIRST YEAR REQUIRED COURSE PACKET Quarter III, Spring 2010 FACULTY Section I: Section II: Section III: SectionIV: Section V: FINANCIAL MANAGEMENT AND POLICIES Quarter III, Spring 2010 Elena Loutskina Marc Lipson Robert Conroy MarcLipson Elena Loutskina IMPORTANT SCHEDULE ANNOUNCEMENT: Thursday, February 19 is a DAY LONG exercise that requires your participation until 5:30pm that evening. By compressing the exercise into a single day we were able to designate Friday as a Reading Day. Please DO NOT schedule any travel until after your obligation for the exercise ends at 5:30pm Thursday evening. COURSE DESCRIPTION First-Year Financial Management and Policies (FMP) reflects three important features of the Darden MBA Program: (1) it is a general management program; (2) the program, through its frequent use of the case method of instruction, has a practical, pragmatic bias and a decision- orientation; and (3) the first-year program provides the basic training on which students can build in the second-year. Consistent with the first-year program, FMP aims to provide: 1. An Introduction. The course provides the basic framework necessary to pursue further study in finance in the second-year of the MBA program and on his or her own thereafter. This framework is an orientation towards valuation. 2. Basic Mastery. The course emphasizes essentials, the tools and concepts that every general manager, entrepreneur, or manager in other functional fields...
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...Prerequisite: GBA 546, all required 500-level courses, and microcomputer proficiency. Concurrent enrollment in GBA 646. Unconditional standing requirement. EXPANDED DESCRIPTION OF THE COURSE AND INSTRUCTIONAL METHODS: A. Expanded Description of the Course: This course reinforces the basic concepts of financial management. The course provides an in-depth discussion of key topics that are critical to financial management: (1) the goals of the firms, (2) financial statement analysis, planning, and forecasting, (3) working capital policy and management, (4) capital budgeting techniques without and with risk, (5) capital structure theory and application, (5) the cost of capital estimation, and (6) long-term financing decisions. In addition, the course examines issues such as lease financing, merger and acquisition, and international financial management. B. Instructional Methods: The delivery system throughout this course will be a combination of class discussion and case analysis. The case analysis will be both in a written format and oral presentation. The amount of lecture will be limited to detailed coverage of concepts pertaining to each individual case. REQUIRED BACKGROUND OR EXPERIENCE: A. Prerequisites: Fundamental of Financial Management (GBA 546), all required 500-level courses, and microcomputer proficiency. If a basic finance course was taken more than three years ago, students are strongly urged to retake GBA 546 again. Conditional, unclassified ,...
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