...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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...warenee THE GRAND DETROIT BANKRUPTCY Frank Borman, a US Astronaut and later a CEO of an airline company in mid seventies, once commented that “Capitalism without bankruptcy is like Christianity without hell.” This fine observation pointing towards lacunae in the capitalist regime has several underpinning examples in the past and now includes the bankruptcy proceedings of Detroit. Once, a booming hub for automotive manufacturing, a prime location as a transportation route along the Great lakes and a center for technological innovation, the city of Detroit has endured devastating economic changes. The city is under a debt of $18.5 billion. Its population is now half of what it was in the 1950s, as majority of the working population has been forced to leave the city primarily due to lack of employment, among other issues. At the beginning of this year, Detroit’s official unemployment rate was 18 percent, more than twice the national average. Is It The First Time? In India, laws are not clear even for firms to file for bankruptcy; however, in the US even a city can do so. In fact, this is not the first time a city has filed for Chapter 9 bankruptcy in a US court. The thing that makes it very different is its magnitude; prior to Detroit’s $18.5 billion, Jefferson County held the record with its $4 billion bankruptcy filing. Closer inspection suggests that there are other differences besides the magnitude of the disaster. While Jefferson County accumulated $3.14 billion in sewer debt...
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...Othman Yeop Abdullah Graduate School of Business Graduate Universiti Utara Malaysia BDFM 7053 GLOBAL ECONOMIC THEORY AND ISSUES UUM-Rezzen KL Third Semester May Session 2013/2014 Prof Dr. K. Kuperan Viswanathan SHORT PAPER #1 INTERDEPENDENCE OF WORLD FINANCIAL MARKETS AND FOREIGN EXCHANGE FLUCTUATIONS Submitted by: ZAHARIN BIN ALI MATRIC No. 95906 June 14, 2014 Short Paper #1 Page |2 1. INTRODUCTION With the increase in advancements in transportation and communications made possible by technology, the world has seen exponential growths in economic ties among all nations. In the last few decades, globalization has resulted in a rapid surge in the interchanging of goods and services reaching across further and faster beyond national borders, whilst increasing the interconnectedness of different markets and cultures. These economic ties come in the forms of international trade, foreign direct investment and monetary integration, made possible with the complementary increase in the interdependence of international financial markets. With further liberalization and deregulation, financial market interdependence grew in momentum alongside the worldwide capital mobilization. This growing interconnectedness of all the world financial markets and the degree of their interdependence have themselves created a subject of substantial interest among economists. The recent global financial crisis has only elevated this interest further, as the impact of U.S. subprime...
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...General motors corporation (GM) filed for chapter 11 bankcruptcy protection, the second-largest industrial bankruptcy in history (worldcom was the largest). GM, which hadn’t made aprofit since 2004, declare in its filing that it had 172 billion in debt and 82 billion in assets. As any competent business student could tell you. The ratio doesn’t make a balance sheet balance, especially when the companys equity is worth little. Fritz Henderson, who named CEO of Gm on march 30,2009, was a numbers guy, but he knew the companys culture had to change. His vision of the new organizational culture revolved around four guidelines: risk taking, accountability, speed, and costumer-product focus. The problem was that GM had tried before to reinvent itself, with mixed success. “GM’s past is littered with the buzzords of culture change. It has struggled to impose cultural change across the highly bureaucratic company in which brands, departments, and regions operated like self governing and competing states within a federation. But GM’s executive said, this time would be different. After all, there was the bankruptcy and the selective elimination of entrenched leadership. Were things really changing, though? Despite his well intentioned plans, Henderson was fired by the board on December 1, 2009 some felt he wasn’t radical enough to change the company. His replacement was the person appointed by the obama administrations car czar to oversee the automakers revival after bankruptcy, ed whitacre...
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...PHILIPPINE LITERATURE Philippine literature is the body of works, both oral and written, that Filipinos, whether native, naturalized, or foreign born, have created about the experience of people living in or relating to Philippine society. It is composed or written in any of the Philippine languages, in Spanish and in English, and in Chinese as well. Philippine literature may be produced in the capital city of Manila and in the different urban centers and rural outposts, even in foreign lands where descendants of Filipino migrants use English or any of the languages of the Philippines to create works that tell about their lives and aspirations. The forms used by Filipino authors may be indigenous or borrowed from other cultures, and these may range from popular pieces addressed to mass audiences to highly sophisticated works intended for the intellectual elite. Having gone through two colonial regimes, the Philippines has manifested the cultural influences of the Spanish and American colonial powers in its literary production. Works may be grouped according to the dominant tradition or traditions operative in them. The first grouping belongs to the ethnic tradition, which comprises oral lore identifiably precolonial in provenance and works that circulate within contemporary communities of tribal Filipinos, or among lowland Filipinos that have maintained their links with the culture of their non-Islamic or non-Christian ancestors. The second grouping consists of works that show...
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...Auditing Cases An Interactive Learning Approach FIFTH M F S D E D ITIO N S. B A. B M. G F. P Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editor in Chief: Donna Battista Acquisitions Editor: Stephanie Wall Editorial Project Manager: Christina Rumbaugh Senior Managing Editor: Cynthia Zonneveld Production Project Manager: Carol O'Rourke Senior Operations Supervisor: Diane Peirano Printer/Binder: BindRite Graphics, Robbinsville Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on the appropriate page within text. Copyright © 2012, 2009, 2006, 2003, 2000 by Pearson Education, Inc., publishing Prentice Hall. All rights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458, or you may fax your request to 201-236-3290. Many of the designations by manufacturers and sellers to distinguish...
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