...(Current CEO and Chairman of the company) and became publicly traded on NYSE in 2006. Under Armour’s core products were performance sport apparel, footwear, and accessories. Its main market is North America (95% of its revenue). Now, it is the second largest sports apparel companies in the U.S. I. Ownership and Control i. Ownership 1. In the quarterly report ended at Sep. 30, 2014, Under Armour reported 213.25M shares outstanding and Under Armour’s executives and directors as a group held 38.75M shares of company stocks, accounting 18.17% of the total shares outstanding (69.7% voting power.) Compared with other companies in our group, only Under Armour and Ralph Lauren were still run by its original founder. Both companies issued special voting shares to its CEO. Because of its CEO’s special identity to the company, these two companies were owned by insiders from the perspective of control power. 2. According to J3 Information Service Website, institutional investors held about 141.76M shares of Under Armour, accounting 66.48% of the total shares outstanding. Institutional investors accounted for Under Armour’s shares were relatively low, compared with other companies in our group. I believe this is because the company’s shares are highly owned by insiders (18.17%). 3. According to J3 Information Service Website, Fidelity Management and Research (FMR LLC), one of the largest mutual fund and financial service companies, holding 20M shares of Under...
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...Beta Management Company | | |Investment Management case study | Table of contents Backgrounds……………………………………………………….……1 Strategies………………………………………………………………...1 Background of California R.E.I.T and Brown Group Inc……………2 Return and risk…………………………………………………….....…2 Summary………………………………………………………………...4 Appendix………………………………………………………………...5 Background: Beta Management Company is a small investment management company based in a Boston suburb founded in 1988. As the company developed, they had roughly 25 million dollars in the 1991. The goal of the company is to enhance returns but reduce risks for clients via market timing. Currently, the company’s funds were invested into the Vanguard 500, an S&P 500 no-load and low-expense index funds (with the reminder in money market instruments). As time goes by, Sarah Wolfe who is the founder of this company think about increasing her equity exposure to 80% with the purchase of individual stock. Strategies: Firstly, Sarah Wolfe uses a market timing strategy based on two portfolios: the Vanguard Index and money market. In order to obtain the capital gains, once the company predicts the market value will rise, it will transfer its assets from the money market to the Index. The limit will up to a maximum 99% of total assets. On the other hand when the company expects the market value will decrease, it...
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...FIN 5439 – Capital Structure and Risk Management Nimlendran Guidelines for the “Cost of Capital at Ameritrade” Case This is a group assignment: * Each group will provide answers to the questions given below Note: You do NOT have to provide a full case report * Submit only one report per team. Submit a word document on Canvas course site. * The report should be well formatted and using 12 point font. Double spaced. All the tables should have their headings and all the units (% , million etc.) clearly indicated. A Word document should be submitted on the course website by one team member before the deadline: All calculations and estimates using Excel should be in formatted tables and inserted directly into the Word document. Note: From the Excel output, only include the important estimates and relevant statistics such as t-stats and standard errors. GRADIN RUBRIC Grade Item | Points out of 100 | Presentation including grammar and style, tables, follow instructions) | 20 | Q1 | 10 | Q2 | 10 | Q3 | 10 | Q4 | 20 | Q6 | 30 | Learning Objectives The case provides an opportunity to understand how capital market data and asset pricing model(s) can be used to estimate the cost of capital (or the required rate of return) for real investments. You do NOT have to write a formal report, but you should provide concise answers with all the assumptions stated clearly for the questions given below. * Estimate stock returns from prices by adjusting...
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...Department Of Business Administration. ASA UNIVERSITY BANGLADESH Subject: Submission of Report. Dear Sir, Here is the report that you have assigned us to prepare on summary of corporate finance. In the preparation of this report, I try to utilize the various related issues that are relevant for corporate finance. However, it is an educational and interesting report. I am very much delighted to be able to work on such a report and learned a lot. FROM, MD.ARIFUL ISLAM ID NO-103-14-0070. SECTION-A. REPORT ON CORPORATE FINANCE Cost of capital The cost of capital is a term used in the field of financial investment to refer to the cost of a company's funds (both debt and equity), or, from an investor's point of view "the shareholder's required return on a portfolio of all the company's existing securities". It is used to evaluate new projects of a company as it is the minimum return that investors expect for providing capital to the company, thus setting a benchmark that a new project has to meet. Cost of debt The cost of debt is computed by taking the rate on a risk free bond whose duration matches the term structure of the corporate debt, then adding a default premium. This default premium will rise as the amount of debt increases (since, all other things being equal, the risk rises as the amount of debt rises). Since in most cases debt expense is a deductible expense, the cost of debt is computed as an after tax cost to...
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...Source Document: HBS case- Marriott Corporation: cost of capital Prepare a case discussion report. The report must at least address the following issues 1. Are the four components of Marriott’s financial strategy consistent with its growth objective? Marriot has following four financial strategy components * Manage rather than own hotel assets. * Invest in projects that increase shareholders values * Optimize the use of debt in the capital structure * Repurchased undervalued shares. The company operates in three divisions having following sales and profit figues (1987) 1. Lodging (41% of sales and 46% of profit) 2. Contract services (46% of sales and 33% of profit) 3. Restaurants (13% of sales and 16% of profit). 2. How does Marriott use its estimate of cost of capital? Does it make sense? Marriott measured the cost of capital for investments of similar risk using the weighted average cost of capital (WACC).Firm WACC is the overall required return on the firm as a whole and it is used by management to determine appropriate investments that could boost the return on its investment and profitability. 3. What is the WACC for Marriott Corp? a. What risk-free rate and risk premium did you use to calculate the cost of equity? Marriot uses CAPM ( Capital asset pricing model) evaluate cost of equity re = risk free rate + beta * risk premium Equity beta given is 1.11 but it is a leveraged beta . In order to eliminate...
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...Week 11 Portfolio Management Project Report PMR Word Template Revised January 2013 Based on the portfolio management report you prepared in week 02 and by utilizing 12 point font, write a double spaced report not to exceed four pages to explain the following: What were your objectives in creating this portfolio? The main objective of my portfolio was to earn returns on my investment, as is typical in many portfolios. Some other objectives that I focused on were accumulation and preservation of capital. Accumulation means that I am basically trying to accumulate funds now to use at a later date. During the accumulation stage “the objective is generally to forgo investments that may produce income by dividends, in favor or investments most likely to appreciate in value, thus maximizing wealth accumulation” (Willis, 2013). I focused more on the potential of the stock itself rather than on the dividends when creating my portfolio. Preservation of capital is exactly what it sounds like; it is simply not losing money. To do this, I chose to diversify my portfolio by using both domestic and foreign securities; I also chose to use the initial price/earnings (P/E) predictor as another investment strategy. According to Malkeil “there is some evidence that individual stocks with low P/E’s relative to the market may produce higher rates of return” (Malkeil, 2012). I would do that by purchasing stocks at fairly low price-earnings multiples and selling them at...
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...arriott Corporation: The Cost of Capital (Abridged) Executive Summary: The case "Marriott Corporation: The Cost of Capital (Abridged)" focuses on an ideal opportunity to review the capital asset pricing model and the weighted average cost of capital through calculation of the cost of capital for Marriott as a whole. Dan Cohrs is faced with making recommendations for the hurdle rates at Marriott Corporation and its three divisions utilizing CAPM and WACC. This case illustrates how to calculate beta based on comparable companies and to lever betas to adjust for capital structure; the appropriate risk-less rate and market risk premium; the choice of time period to estimate expected returns and the difference between the geometric and the arithmetic average as a measure of expected returns. SYNOPSIS Marriott Corporation began in 1927, and over the next 60 years, the company grew into one of the leading lodging and food service companies in the US. In 1987, the Marriott's annual report stated, "We intend to remain a premier growth company. Our goal is to be the preferred employer and provider, and the most profitable company". Marriott's profits were $223 million on sales of $6.5 billion. In April 1988, vice president of project finance at the Marriott Corporation, Dan Cohrs, must prepare annual recommendations for the hurdle rates at each of the firm's three divisions, including restaurant, lodging, and contract services, as well as...
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...investments. We observed that this specific portfolio gave us more stable returns, which we attributed to the lower betas of these stocks. One can also conclude that the worst performers of the same portfolio were due the same cause. Based on the returns of our managed portfolio, one can conclude that we chose to take a safe approach and invest in stocks that had low, but steady returns and growths. At the end of the semester, our strategy proved to be successful based on our overall returns. On the other hand, our control portfolio, which takes a passive management approach, had a different outcome. In this type of management, it is imperative that one waits a longer period of time to receive the expected returns. However, we had surprising results as our stocks for this portfolio had large returns. We believe that this exceptional result was due our clever choice of industry. Also, the worst performers of this portfolio presented larger negative returns than we predicted. We also attribute these results to the betas of the stocks that were relatively high, therefore yielding a higher stock price volatility. Another reason is that passive portfolios have similar returns to the overall market, like a mirror, so these stocks had obviously these returns due to the market change as a whole. At the end of the project, we believe that choosing the passive management style is slightly better than managed portfolio style. Even though the...
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...Stephanie Doherty David Dubois Radu Oprea October 15th, 2009 Contents Objectives 1 Management Summary 1 Cost of Equity 1 Equity Market Risk Premium 1 Beta 2 Risk Free Rate 2 Capital Structure Weights 2 Boeing 7E7 Project Evaluation 4 Circumstances for an economically attractive project 4 Market Demand 4 Market Share 4 Sensitivity Analysis 4 Conclusion 7 Board approval for the project? 7 Appendices 7 Appendix A 7 Objectives This report seeks to answer the following three questions about the Boeing 7E7 project: 1. What is an appropriate required rate of return against which to evaluate the prospective IRRs from the Boeing 7E7? a. Please use the capital asset pricing model to estimate the cost of equity. b. Which equity market risk premium (EMRP) did you use? Why? c. What Beta did you use and how did you derive it? d. Which risk-free rate did you use? Why? e. Which capital-structure weights did you use? Why? 2. Judged against your WACC, how attractive is the Boeing 7E7 project? a. Under what circumstances is the project economically attractive? b. What does sensitivity analysis (your own and/or that shown in the case) reveal about the nature of Boeing’s gamble on the 7E7? 3. Should the board approve the 7E7? Management Summary The analysis identifies...
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...examine the sources of risk; analyze its capital structure and decide whether the firm is under- or over-leveraged; examine its dividend policy and decide whether the firm is under- or over-leveraged; and value the firm. How is the project structured? This is a project requiring by individual analysis and group synthesis. Each group should have at least 5 members but not to exceed 7. Each group will pick an industry to study. Each group member will pick a firm within this chosen industry to analyze. The companies chosen does not imply that they be competitors. For instance, a group can pick a company that manufactures personal computers, a company that produces software, and a company that provides computer services as part of the same group. Each person will be responsible for doing the entire analysis for the company that he or she has chosen. At the end of the process, the group will write one integrated report for all the firms in the group. In this report, the firms will be compared and contrasted and the results will be presented as a whole rather than as five separate parts. How will the project be graded? Each group will be graded on the final project and all of the presentations during the semester. The group grade will be allocated according to the Grade Allocation Sheet (see syllabus). In addition, members will be graded on their individual project parts turned throughout the semester. See the due dates below. Date Project 1/22 Pick the firms for...
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...Equity Research Report 19th July 2012 Idea Cellular Limited CMP:INR81.4 Stock Information IDEA.NS/ IDEA.BO Sector Telecom Market Cap.(INR Mil) 280,832 Avg. Daily Volume 1,560,228 Beta 0.94 PE Ratio 38.7 52 Week High/Low 103.7/65.6 SENSEX/Nifty 117266.6/4159.0 Price Perfromance Idea 1 Month 3 Month 6 Month 12 Month 10.2% -6.1% 0.5% 5.4% S&P CNX 500 1.9% -2.8% 4.9% -9.2% “Rating:Hold (on watch)” Target Price: INR96 Our DCF valuation indicates upside of almost 18% from current price level in next 12 months but consideration of potential regulatory cost makes it unattractive at the moment. We should rather wait for regulatory uncertainty to get over. Key Highlights Tariff rates: We see strong likelihood for tariff hike across the board after auction is completed in August 2012 as current price of spectrum and prevalent low tariff make the business unviable. Market share: Since small operators have shifted their focus on cash conservation and margin improvement, incremental market share of top three players have increased considerably. Idea ranks second after Airtel in terms of market share of new subscribers addition. Negativity: Recently telecom players have been going through uncertain times due to pressure from different corners: regulatory, operationally and financially. We believe this negativity has already been accounted in current price. However, sensitivity to Idea’s balance sheet of expected cash outflow is high due to smaller balance sheet size...
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...Financial Accounting Theory Test 1: 1) Please briefly describe the essences of the following cases of accounting scandal or earnings management. (20 points) A) ENRON (8 points) * Enron created many special purpose entities (SPEs) controlled by senior Enron officers that they used in conducting off balance sheet financing * SPE’s borrowed money from banks using Enron’s stock as collateral However all of the liability was reported on the SPE’s books, not on Enron’s, even though the borrowed cash went to Enron * Thus investors had no idea of Enron’s debt because they did not consolidate the SPE’s like they were suppose to under GAAP * Enron also charged fees for management and other services supplied to their SPE’s and included appreciation of its own stock which exaggerated net income * They had to consolidate their financials resulting in a reduction of shareholder’s equity, restatement of previous 4 years earnings, loss of investor confidence, share price fell from $90 to 66 cents then 1 cent * The SEC revoked the auditing license of accounting firm they used, Arthur Anderson B) MCI WORLDCOM (8 points) * From 1999-2002 they overstated their earnings by $11 billion * $4 billion of this amount was from capitalization of network maintenance and other costs that should have been expensed * and $3.3 billion came from reductions in the allowance for doubtful accounts * WorldCom’s merger with MCI was a disaster and went bankrupt...
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...Corporate Financial Management BA 7020 – Section 200 Fall 2012 Marriot Corporation [pic] Group 9 Timothy Muer Adnan Qureshi Valerie Schmidt Joshua Swartz December 16th, 2012 December 16th, 2012 Dan Cohrs Marriot Corporation Vice President of Project Finance RE: Marriott Corporation Consultant Summary Dear Mr. Cohrs, We are pleased to offer our consulting opinion in regards to the cost of capital, debt, and equity. We have reviewed and analyzed the industry and market data provided as well as heavily researched your industry to understand trends, risks, growth potential, etc. The attached report is a detailed summary of problems and decisions faced based on the method of calculating the cost of capital, cost of equity, and the cost of debt. We have focused our efforts to specifically outline the correct risk free rate, risk premium, hurdle rate, and beta to be used in those calculations. In addition to analysis of the problems, we have also outlined recommendations for the future. These recommendations include a 8.72% risk free rate, 7.92% risk premium, and 1.135 beta for the Marriot Corporate as a whole as well as individual risk free rate, risk premium, and beta for each division. Additional in depth analysis is provided within the report. Also included are detailed explanations for the recommendations referenced above. We look forward to witnessing your continued growth and wish you success in the future! Sincerely...
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...COMPARISON BETWEEN THE BOEING COMPANY AND LOCKHEED MARTIN Keith L. Hohl EMGT 452 Semester Project 14 December 1999 Table of Contents 1. Introduction/Study Objective 2. Boeing Financial Statement and Analysis 2.1. Background and Product Lines 2.2. Consolidated Balance and Income Statements 2.3. Divisional Financial Statements 2.4. Ratio and Trend Analysis 3. Lockheed Martin Financial Statement and Analysis 3.1. Background and Product Lines 3.2. Consolidated Balance and Income Statements 3.3. Divisional Financial Statements 3.4. Ratio and Trend Analysis 4. Financial Comparison between the Two Companies 4.1. Consolidated Comparisons 4.2. Military Aircraft and Space Divisions Comparisons 5. Summary/Conclusions 6. Bibliography 7. List of Tables 8. List of Figures List of Tables T-1: Consolidated Financial Balance Sheet-The Boeing Company T-2: Consolidated Income Statement-The Boeing Company T-3: Divisional Financial Summary-The Boeing Company T-4: Consolidated Financial Ratio Analysis-The Boeing Company T-5: Consolidated Financial Balance Sheet-Lockheed Martin T-6: Consolidated Income Statement- Lockheed Martin T-7: Divisional Financial Summary- Lockheed Martin T-8: Consolidated Financial Ratio Analysis- Lockheed Martin List of Figures F-1: Total Assets Divisional Trend Analysis-The Boeing Company F-2: Sales Divisional Trend Analysis-The Boeing Company F-3: Net Earnings Divisional...
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...E NG FO A R GE SA LE LEA OR R N CL ING AS SR O Northern Forest Products OM Case 90 Cost of Capital Directed FO R Northern Forest Products (NFP) was established in the 1800s to log timber in the Great North Woods. In response to changing conditions, the company underwent radical changes in the way it operates and currently it is a large multidivisional corporation. The major focus of the company remains managing over one million acres of timber production and overseeing the manufacture of consumer paper products from pulp derived from its land holdings. Over the years the company has diversified into several other related businesses, such as a moderately sized mill that produces paneling and wood flooring. This operation has developed a consistent outlet for all of its output and therefore is stable. The company is also involved in real estate as a result of developing some of the prime lake front properties from its forestlands for residential and private recreational use. Successful property development during the 1970s resulted in expanded real estate holdings. However, residential development was particularly hard hit during a recent economic downturn, and the company struggles in this area. NFP is aware of the increasing international demand for wood products and is concerned about recent environmental pressures concerning logging. The company believes that diversification strengthens its overall economic health and, therefore, recently...
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