...® a practical guide for business calculations ALASTAIR L. DAY Alastair Day has worked in the finance industry for more than 25 years in treasury and marketing functions and was formerly a director of a vendor leasing company specializing in the IT and technology industries. After rapid growth, the directors sold the enterprise to a public company and he established Systematic Finance plc as a consultancy specializing in: • financial modelling – review, design, build and audit • training in financial modelling, corporate finance, leasing and credit analysis on an in-house and public basis • finance and operating lease structuring as a consultant and lessor Alastair is author of a number of books including three published by FT Prentice Hall: Mastering Financial Modelling, Mastering Risk Modelling and The Financial Director’s Guide to Purchase Leasing. Alastair has a degree in Economics and German from London University together with an MBA and is an associate lecturer of finance with the Open University Business School. Excel a practical guide for business calculations Tools enabling managers to carry out financial calculations have evolved in the last 20 years from tables through calculators to programs on PCs and personal organisers. Today, the majority of those in finance have Excel on their desks and increasingly on their laptops or pocket computers. Mastering Financial Mathematics in Microsoft ® Excel provides a comprehensive set of tools and ...
Words: 2202 - Pages: 9
...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 should know. 3. A Corporate Perspective. Because we seek to understand the problems of general managers, this is a corporate finance course, rather than a course in investments, banking, or personal finance. While elements of these related subjects must be brought to bear, our ultimate focus is corporate policy and tactics. 4. An Underpinning for Addressing Broad and Challenging...
Words: 4860 - Pages: 20
...the ratio of debt to capital – very low. By doing this, they had a credit rating of A- from rating agency S&P (see Exhibit 1 for data on ratings). In September 2005, Lars Dahlgren, CFO of Swedish Match, is considering a radical proposal. By issuing new bonds for a total of 4 billion SEK, and repurchasing shares with this money, he wants to increase the firm’s leverage. Yet Dahlgren understood that the board would raise several concerns about the proposal. In this paper, the pros and cons of this new financial policy will be addressed, based on arguments and calculations. One of the reasons Dahlgren wants to propose this new financial policy, is to reduce its annual tax payments. His expectation is that the tax savings from this transaction will boost the stock price and benefit shareholders. For a 4 billion SEK recapitalization, Swedish Match has to pay 180 million SEK interest in the next year. Since the corporate tax rate on income is 28%, Swedish Match will reduce its annual tax payments by 50.4 million SEK. The value of this interest tax shield is 1,12 billion SEK (28%*4 billion recapitalization), so the market value of the firm’s assets will rise by 1,12 billion SEK. As shown in Exhibit 2, the ratio of debt to equity changes radically, but the book value of the assets remains the same. However, the market value of the company’s assets does change (as shown in Exhibit 3)....
Words: 1413 - Pages: 6
...WESTERN KENTUCKY UNIVERSITY COLLEGE OF BUSINESS ADMINISTRATION FIN 437—Corporate Asset Management Dr. Indudeep S. Chhachhi Fall, 2014 Department of Finance E-Mail: indudeep.chhachhi@wku.edu Office & Office Hours: 327 Grise Hall, 745-2928 M/W 11:15 - 12:30 p.m. T 10:15– 12:30, and by appointment Texts and Calculators Required Stephen Ross, Randolph Westerfield, and Jeffrey Jaffe, Corporate Finance (10th ed., McGraw Hill, Irwin, 2013). Subscription to Connect (McGraw Hill) for Corporate Finance (10th edition) (Connect Plus will give you access to the eBook) Texas Instruments' BA II Plus Professional. Strongly Recommended Subscription to The Wall Street Journal. Course Objectives As the second undergraduate finance course, the purpose of Corporate Asset Management is to provide business students with a greater depth of understanding of topics that are applicable to the financial management of modern business corporation. Learning Objectives After completing this course students will be expected to have mastered topics such as: * Risk and Return * Valuation Process and Capital Budgeting * Financial Policy, Options, and Corporate Restructuring. Prerequisites FIN 330 with a grade of “C” or better and completion of, or current enrollment in, ECON 307. If you have not completed the prerequisite listed above, You should drop the class immediately. It is possible that you will be dropped from the class...
Words: 2197 - Pages: 9
...Objectives Corporate finance in emerging markets is a complex field for managers and academics. Most of the models used in investments and corporate finance have been developed under the assumption of at least moderately efficient markets, but this assumption seems to be questionable when moving to less developed markets. Emerging markets are not efficient markets; they are characterized by higher information asymmetries, higher transaction costs, more concentrated ownership, lack of market development, relatively low market liquidity, etc. Additionally, there are relevant differences in terms of suitability for the use of standard corporate finance techniques in the context of small and medium private enterprises. The present survey examines capital budgeting, cost of capital, capital structure and dividend policy decision of the four firms namely Schmit telecom, Sanehwal fasteners, LPS limited and Bharathi Soap works. The study analyses the responses conditional on firm characteristics. It examines the relationship of the executives' response with firm size, profitability, risk, growth, CFO's education, and the sector. By testing whether responses differ across these characteristics, the study throws light on the implications of various finance theories concerning firm size, risk, and growth. The survey also given us the knowledge about practices followed by different companies depending on the sector in which they exist. Market position has also played significant role...
Words: 3838 - Pages: 16
...has equity, debt and lease payments in its capital structure. The following are the calculations performed in order to determine the WACC for the firm. Cost of debt According to Moody’s report for year 2014, the credit rating of Baa1 reflects excellent liquidity and financial policy for the shareholders (Moody, 2014). Even though the article reflected it to be a positive sign for the firm, still the rating is quiet low. Based on the financial statements of Amazon.com, if the firm has good credit ratings it must add 0.625% to the LIBOR rate in order to derive the cost of debt and if the rating is poor it must add 1% to the LIBOR rate (Amazon, 2014). I presume the credit rating to be extremely low so adopting a conservative approach, I have rather added 2% to the rate: The cost of debt for Amazon.com therefore is: KD= RF + spread KD= 0.561% + 2% KD = 2.561% For Amazon.com, the interest rate is the function of LIBOR rate so the book value approximately equals the market value. The estimated fair value of long-term debt is $9.981 billion ($9.1 billion for notes and $881 million for other long-term debt) as stated in the note 6 to the financial statements. Cost of equity The method preferred for calculating the cost of equity for Amazon.com is by applying CAPM model. The beta for 2014 has been determined by using the daily returns of market index i.e. S&P 500 and the stock (Finance, 2014). The results were as shown in the table below: Covariance | 0.000069 | Variance...
Words: 944 - Pages: 4
...Bilal Al- Qureshi, Said Business School, University of Oxford 2010 American Chemical Corporation HBS Case Number: 9-290-102 Executive Summary The American Chemical Corporation (AMC) is a large, diversified chemical producer. In 1979, AMC was forced to issue a tender to sell a Sodium Chlorate plant, near Collinsville, Alabama. Dixon, a specialty chemicals company, was willing to purchase the aforementioned plant for $12m with the option to invest a further $2.25m on laminate technology. The subsequent investment in Laminate technology was expected to eliminate graphite costs and reduce power consumption at the Collinsville plant by 15% to 20%. We will evaluate the acquisition of the Collinsville by Dixon at the proposed price. Table 1 identifies the assumptions that have been used for the evaluation of this acquisition. Table 1 Assumptions Laminate Technology reduces power by a mean of 17.5% Laminate Technology is depreciated over 10 years Sodium Chlorate price growth is 8%, per annum Power cost (per KWH) growth is 12%, per annum Plant Life is 10 years Plant Salvage Value is zero EBIT is flat after 1984 Capital Expenditures: $600,000 per annum after 1984 Net Working Capital Remains flat after 1984 Definition of “Flat” Reference Pg 3, HBS 9-280-102 Pg 3, HBS 9-280-102 Pg 4, HBS 9-280-102 Pg 4, HBS 9-280-102 Pg 1, Assessed work Sheet Pg 1, Assessed work Sheet Pg 1, Assessed work Sheet Pg 1, Assessed work Sheet Pg 1, Assessed work Sheet Pg 4 http://www.imf.org/external/pubs/ft/wp/2006/wp06218...
Words: 2360 - Pages: 10
...WACC What does Weighted Average Cost Of Capital (WACC) mean? A calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All capital sources - common stock, preferred stock, bonds and any other long-term debt - are included in a WACC calculation. All else equal, the WACC of a firm increases as the beta and rate of return on equity increases, as an increase in WACC notes a decrease in valuation and a higher risk. The WACC equation is the cost of each capital component multiplied by its proportional weight and then summing: Where: Re = cost of equity Rd = cost of debt E = market value of the firm's equity D = market value of the firm's debt V = E + D E/V = percentage of financing that is equity D/V = percentage of financing that is debt Tc = corporate tax rate Businesses often discount cash flows at WACC to determine the Net Present Value (NPV) of a project, using the formula: NPV = Present Value (PV) of the Cash Flows discounted at WACC. Investopedia explains Weighted Average Cost Of Capital (WACC) Broadly speaking, a company’s assets are financed by either debt or equity. WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar it finances. A firm's WACC is the overall required return on the firm as a whole and, as such...
Words: 314 - Pages: 2
...UNIVERSITY OF WASHINGTON Graduate School of Business Administration Finance 553 CAPITAL INVESTMENT PLANNING Winter 2003 Professor Robert C. (Rocky) Higgins 306 Mackenzie Hall Tel: 543-4379 E-mail: rhiggins@u.washington.edu Homepage: http://us.badm.washington.edu/higgins/ (From here you’re one click from the class page) Office Hours: M, W: 10:30 – 12:00 COURSE OBJECTIVE Capital Investment Planning is a case course examining corporate investment decisions and related issues in financial strategy. The course is intended as a continuation of Finance 552, Corporate Planning and Financing, and is suitable for generalists and finance specialists who seek a solid grounding in corporate financial management. Finance 555 may be substituted for Finance 552 as a prerequisite. Principal topics include: use of discounted cash flow analysis to evaluate investment opportunities, estimating capital costs, or discount rates, capital budgeting systems and their affect on resource allocation decisions, valuing a company or division, merger analysis, corporate restructuring including leveraged buyouts, and issues in financial strategy. When you complete this course, you should be able to: Estimate an investment’s relevant costs and benefits Estimate a company's weighted-average cost of capital and understand its role in investment decision making Use discounted cash flow techniques, decision trees, and simulation to analyze investment opportunities Value (i...
Words: 3270 - Pages: 14
...FUNDAMENTALS OF FINANCE AND INTERNATIONAL FINANCIAL MANAGEMENT COURSE CONTENTS 1. Fundamentals of Finance 1.1. What is Corporate Finance? 1.2. The Financial Manager 1.3. Financial Management Decisions 1.4. The Goal of Financial Management 2. Basic Tools of Financial Analysis: Accounting Statements and Ratio Analysis 2.1. The Balance Sheet 2.2. The Income Statement 2.3. Cash Flow 2.4. Ratio Analysis 2.5. The Du Pont Identity 2.6. Using Financial Statement Information 2 COURSE CONTENTS 3. Financial Equilibrium 3.1. Current Asset Management 3.2. Short Term Financing 3.3. Working Capital Management 4. Financial Forecasting 4.1. Pro Forma Statements and Financial Planning 4.2. Cash Flow Forecasts 4.3. Cash Budgets 4.4. Cost of Capital 4.5. Capital Structure 4.6. Financial Planning 3 COURSE CONTENTS 5. Identification of Financial markets 5.1. Money Market 5.2. Capital Market 5.3. Foreign Exchange Market 5.4. Derivatives Market 6. Management of stocks, bonds, derivatives and other assets 6.1. Potfolio Theory and Asset Pricing 6.2. Common Stock Analysis and Equity Pricing Models 6.3. Fixed Income Analysis and Bond Pricing 6.4. Futures, Options and Other Derivatives 4 COURSE CONTENTS 7. Foreign exchange markets, currency derivative markets and Euromarkets 7.1. Function and structure of foreign exchange markets 7.2. Forecasting foreign exchange rates 7.3. Currency Futures and Options Markets 7.4. Eurodollar Interest Rate Futures Contracts 7.5. International...
Words: 549 - Pages: 3
...Financial decision making Contents Introduction: 1 Task: 1 1 (a) Ratio analysis on the basis of AstraZeneca Annual Report and Form 20-F Information 2012: 1 (b) Business structure and financial structure (comparison and relative advantages of the chosen organization) 5 (c) Compare and comment on the finances of business: 7 (d)Recommend potential investor for the investment decision: 8 (e)All possible Sources of finance for 500000 and best source 8 (f) Management of working capital: 10 Task 2: 11 (a)Preparations of a cash flow forecast and comment on budget and cash flow: 11 (b)Recommendation for managing cash flow: 12 Task 3: 12 (a)Assessment of projects by financial techniques: 12 (b) Recommendation from the above calculations and reason behind the choice: 13 Conclusions: 14 Reference: 15 Introduction: Finance is the paramount part of every organization. Whatever the size of the company, financing plays a vital role in the business organization. Ratio analysis is an important tool for the business decision as well as for the interpretation of the financial statements. We have selected AstraZeneca Annual Report & form 20-F information 2012. All the ratio analysis and decision in respect of the business structure as well as financial structure are based on this particular company. Investment appraisal techniques like- NPV, internal rate of return, payback period, accounting rate of return are based on the given data. This report suggests appropriate decision...
Words: 3459 - Pages: 14
...Midland Energy Resources Inc.: Cost Of Capital Introduction Midland Energy Resources have a senior vice president, Janet Mortension, of project finance. She was preparing her annual cost of capital for midland as well as for each of its following three divisions: * Exploration & production (E&P) * Refining & Marketing (R&M) * Petrochemicals Midland was a global company with operations in oil and gas. Midland corporate treasury had began analysis and preparation of annual cost of capital for the corporation as a whole and for each divisions as part of annual capital budgeting process but this estimates were often criticized, and Midland division presidents and controllers sometimes challenged specific assumptions and inputs. The case uses comparable companies to estimate asset and beta for each individual division, and must comply the capital asset pricing model for calculating the cost of capital. Midland was conservative compared to some of its large competitors, but it has a group of trader in- house who actively managed currency. Interest rate and commodity risks within a set of guideline approved by the Board. Midland Energy Resources ha d been incorporated more than 120 years previously and in 2007 had more than 80,000 employees. Midland’s financial strategy in 2007 was founded on the following four pillars: * Oversees Growth * Value- Creating Investment * Optimal capital structure * Stock Repurchases Oversees Growth: Oversees investment were the main engine...
Words: 1046 - Pages: 5
...first year will involve a standard $850,000 advertising budget, but with the intention of reducing this level by 15% per year given that momentum has been built. We will also have another advertising expense that will depend on the number of units sold, costed at $7/unit. From a fixed cost perspective, we expect $17,500,000 per year. New manufacturing equipment for this project is expected to $150,000,000, which can be depreciated straight line over the 5 year life of the project. Separately, we envisage shipping and installation costs of $1,000,000 which can be depreciated over the life of the project. At this stage we intend to donate the equipment to a developing country, which acts as a tax deductible donation but also supports our corporate responsibility program. In order for the project to be viable, we also need to account for...
Words: 2516 - Pages: 11
...FIN 675 - CORPORATE FINANCIAL STRATEGY - 3 CREDITS Instructor Details: Instructor: John Manley, Ph.D. Office: Finance House, 85 Beechmont Drive, New Rochelle, NY Phone: 914 637 2733 Fax: 914 633 2286 Email: jmanley@iona.edu Office Hours: half hour before class and by appointment Prerequisite: MBA 550 – Finance for Managers Course Objective: Upon completion of this course, the student should have an understanding of 1. governance issues of the firm [chap. 1 & lecture] 2. valuation concepts and processes [chap. 3, 5, 8, 9, 29] 3. capital budgeting estimation and decision methods [chap.6, 7] 4. debt, equity and lease financing issues [chap. 14, 20, 21] 5. risk defined and measured in a CAPM setting [chap. 10, 11] 6. variations in the calculation of cost of capital [chap. 13, 18] 7. capital structure and dividend policy decisions [chap. 15, 16, 17, 19] Suggested Other Courses: FIN 644 concerns of short-term financial planning and financing FIN 625 concerns of risk management with derivative securities FIN 620 concerns of multinational financial management Required Text: Ross, S., R. Westerfield, and J. Jaffe, Corporate Finance, current edition, Irwin. Recommended Supplemental Reading: The Wall Street Journal Barron's Value Line Investment Survey Financial Times Major Units of Instruction: Weeks Topics 1 Corporate Governance (extension...
Words: 473 - Pages: 2
...COURSE DESCRIPTION Introduces the concepts of finance. Reviews the basic tools and their use for making financial decisions. Explains how to measure and compare risks across investment opportunities. Analyzes how the firm chooses the set of securities it will issue to raise capital from investors as well as how the firm’s capital structure is formed. Examines how the choice of capital structure affects the value of the firm. Presents valuation and integrate risk, return and the firm’s choice of capital structure. INSTRUCTIONAL MATERIALS Required Resources Brigham, E. F., & Ehrhardt, M. C. (2014). Financial management (14th ed.). Mason, OH: South-Western Cengage Learning. Supplemental Resources MBA Primer Note: The MBA Primer is designed to help students with little or no educational background in business to prepare for the rigors of an MBA program. The MBA Primer is also a useful tool for students who have the business background but might need a refresher. It is a way to help you prepare for the types of activities and concepts that will be covered in the MBA program, so you can feel more comfortable and confident as you progress into higher level courses. Students are emailed an access code for this product when they purchase MBA Primer from the Strayer Bookstore, accessible through iCampus. CNN Money. (2013). General format. Retrieved from http://money.cnn.com/ Criniti, A. (2013). The necessity of finance. Philadelphia, PA: Criniti Publishing Company. ...
Words: 1233 - Pages: 5
