...Nike Cost of Capital I. Single of Multiple Costs of Capital Since Nike has multiple business segments it is appropriate to question whether to use single or multiple costs of capital for the analysis. Kimi’s assistant Joanna went ahead and chose to use one cost of capital for Nike. We agree with her decision because Nike’s different segments are all generally sports related and are susceptible to the same market risks. For example, Nike’s footwear and apparel lines, which make up a combined 92% of their revenue, are segments that complement each other and are sold through the same marketing and distribution channels. Non-Nike products made up only 4.5% of Nike’s revenue including the Cole Haan brand, a company that sells casual dress and footwear products. Since the Cole Haan is the only business segment that took on different risks than the others and since it makes up such a tiny fraction of the revenues, its impact on the decision is insignificant so one cost of capital should be used for the whole company. II. Methodology for Calculating Cost of Capital Joanna is correct to use the WACC method for computing the costs of capital. However, her estimation of the proportion of debt to equity is incorrect because she uses book values from the past instead of using the current market values. The reason why we must use the current market value of debt and equity is so that the estimate of Nike’s present day WACC is as accurate as possible. Using book values, even though it...
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...Captial punishment results in death by execution. It is legal in many states as a punishment for serious crimes, but that does not make it right. Captial punishment should be stopped because it is morally wrong, expensive and such a slow process. First of all, there is no moral basis for it. When we use the death penalty, we are follwoing the criminals' example by doing something equally as bad ourselves. We are taking one life for another life. There is also a chance that a mistake will be made, and the wrong person will be put to death. Is this type of revenge worth such a risk? Another problem with captial punishment is the high cost. For example, the special prison housing is expensive to staff and keep up. States with the death penalty use taxes to pay these expenses. Over the past 13 years, Florida has spent $57 million to carry out 18 executions. If you divide this dollar amount by the number of executions, you come up with a cost of $3.2 million for each execution. that is a great deal of money. In addition, using the death penalty is a very slow process. At least 97 percent of all death-row prisoners are not executed on time. As a result, the waiting list for executions grows year after year. If the U.S. legal system executed one inmate every day, it would still take 30 years to empty all of fthe cells on death row. A process this slow does not make sense. In conclusion, capital punishment should be dropped from our legal system. People should...
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...Suggested Questions 1. Identify the key problem in the case and explaining why it is the key problem. With a rapid growth in Mr. Clarkson Lumber’s business, and an anticipated future substantial increase in sales in the 1996, the problem for Mr. Clarkson was a shortage of cash and had found it necessary to increase it borrowing. Nonetheless the company had a consistent profitability, the company still had serious shortage with cash due to several reasons. The key problem for Mr. Clarkson is should they give up the current limited trade creidt in order to get a bigger loan from a much larger bank Northrup National Bank. 2. Why has Clarkson Lumber borrowed increasing amounts despite its consistent profitability? Nonetheless, Clarkson Lumber had a consistent profitability in the past years. The several reasons still make Mr. Clarkson in cash shortage trouble. First, in 1994, Mr. Clarkson bought out Mr. Holtz’s interest for $200,000. And Mr. Holtz had taken a note for $200,000 with 11% interest to be paid off semi-annually with a installment of $50,000 from 1995 to1996. Second, what’s more, in 1996, Mr. Holtz will take a part of cash from Clarkson Lumber. Especially, semi-annually payment in June will meet a seasonal peak of sales from April to September. The working capital of Clarkson Lumber may meet a more heavy shortage than the past. Third, and one of most improtant reason is Clarkson Lumber need additional funds to support their business...
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...The William Wrigley Jr. Company: Captial Structure, Valuation, and the Cost of Capital Thomas A. Dotter University of the Incarnate Word Introduction In the case study, “The William Wrigley Jr. Company: Captial Structure, Valuation, and the Cost of Capital” the author, Robert Bruner, examines how Blanka Dobrynin, managing partner at Aurora Borealis, explores the opportunity to persuade Wrigley’s board to complete a leveraged recapitalization through a dividend or major share repurchase. Through her active investor strategy, Blanca is trying to increase the value of investment in Wrigley. Blanca’s objective would be to create ultimately new value in Wm. Wrigley Jr. corporation and thus increase the value of Aurora Borealis’ initial investment in the firm. As a result of using the three billion to complete a significant share repurchase or by increasing the dividend to stockholders; Finance theory can be used to demonstrate how Blanca’s strategy will enhance the value of the firm and ultimately increase Aurora Borealis’ initial investment. Case Study Questions Based on the theory and research papers read during the semester, the following is an analysis of the effects of issuing $3 billion of new debt and using the proceeds either to pay a dividend or to repurchase shares on: 1. Wrigley’s outstanding shares? a. A firm can leverage debt to maximize profitability which will allow the firm to compete in a competitive market (DeAngelo & Masulis, 1979)...
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...and income statement for Competitive Bikes and Two Wheel Racing.The horizontal analysis can take into account either the dollar amount of the changes over theyears or the percentage of change for the years. This analysis will consider both items, and willalso be comparing years 6 and 7 and 7 and 8. Year 7 The analysis of years 6 and 7 shows a positive result for Competitive Bikes. RevenueThere was a positive increase in revenue for years 6 and 7. Net sales increased by $1,495,000 between years 6 and 7. This was a 33.3% increase for Competition Bikes. The cost of goodssold increased $1,048,000. This was a 31.8% increase. The fact that net sales increased by33.3%, and cost of goods sold increased by only 31.8% was a significant factor in these twoyears. This was a positive result, because net sales increased more than what the cost of goodssold increased. Competition Bikes found a way to sell more bikes at a lower cost for thecompany. This is why the company had an increase of 37.5% in gross profit.Selling ExpensesTotal selling expenses increased by 33% between years 6 and 7. This was expected, becausemost of the selling expenses are considered variable expenses. Variable expenses are expensesthat increase as production and sales increase. Sales commissions, distribution network support,and transportation out are all considered variable expenses. Knowing that net sales increased by33.3%, and these expenses increased by 33% shows they are variable expenses. This increasewas totally...
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........................5 Working capital management............................................................................5 1.1.1. 1.1.2. 1.2. 1.3. Role of working capital management .......................................................................6 Components of working captial management .........................................................7 Account receivables ............................................................................................7 Account payables ..............................................................................................10 Inventories .........................................................................................................12 Optimal level of working capital .....................................................................14 Working capital measurement ........................................................................15 Barriers to optimizing working capital ...........................................................17 Keys to optimizing working capital .................................................................18 1.3.1. 1.3.2. 1.3.3. 1.4. 1.4.1. 1.4.2. 1.4.3. 1.4.4. 2. 2.1. Optimizing working captial management...
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...proposal comes, so that they will review the GEOGRAPHY of that location and the possibilities of having a Target Outlet at that locality. CEC was started as an approval class, whose approvals are needed to get the store up and running if there is a chance for starting up a new store in any geography (Real-estate managers are responsible for this) Which of the five CPRs should Doug Scovanner accept? Be prepared to explain how each of the considerations that follow influenced your decision: Out of the 8 choices available, I would tell that Scovanner will accept NPV/IRR, Size of the project, Customer demographics, Brand‐awareness impact, Cannibalization of other stores’ sales, because, • NPV and IRR are two main things when coming to Captial Budgeting and the • size of the project, the higher the size, the maximum will be the returns and yes, it involves risk but the returns will be huge if the project is a success , • Brand-awareness impact – Because, nowadays people are driven by the brands rather than for products… it’s the belief that they have on those brands that they will be good, • Customer Demographies also plays an important role because,...
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...etc. * Menu Key to take you back to previous page. * Historical pricing (HP) – amber is always something that can be edited. Can be exported to excel. * Diff between static (raw data can be taking out without being protected) and dynamic data. There’s a way to pull Bloomberg data in excel without being in Bloomberg. * Financial analysis page. (equity analysis )Useful if taking accounting. For public companies. Market cap, revenue. For fundamental analysis, see what makes a company tick. Can be transported to excel * Only work if on same computer. If values are formula, just copy and paste the info in other cells and there will be no formulas. - if I want to save on thumb drive. * Weighed ave cost of captial – WACC. HELP page shows...
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...Captial Capital Purchase Justification Yvonne Brown-Ramirez Grand Canyon University April 27,2016 The equipment that I recommend is the CAT scan because I think it will help the hospital more than the MRI machines since it will help examine the whole body instead of just one certain part of the body.CAT scans are very useful because it helps us figure out the cause of why the patient is sick and it takes pictures that are more detailed than the MRI. Computed tomography (CT) is an imaging procedure that uses special x-rays equipment to create detailed pictures or scans areas of the body. When using this type of machine, it helps take continuous pictures in a spiral fashion instead of taking a series of pictures as the MRI does, I do not know much about MRI or CAT SCANS but I think CAT SCANS are better and will help determine the cause of cancer or any type of sickness the patient may have. I think the CAT SCAN equipment would be useful and beneficial to the hospital because it will help reduce the amount of radiation that is used during the test and it will use less radiation for the older equipment. The hospitals want to be equipped with the most up to date equipment to make sure that it will last for as long as five to ten years at the most because they do not want to spend excess money they may not have to purchase the CAT SCAN equipment. According to Modern Healthcare, “The average price of computed tomography systems went up 15% in the past month as more...
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...Investing in Bonds A Lesson from the Past: ********************************************************************************************************** 8. According to Mary Goldberg, the chance to invest in New World Explorations was `too good to pass up.` Unfortunately, it was too good to be true, and she lost $10,000. Why do you think so many people are taken in by get-rich-quick schemes? Student Answer: Many people fall for get rich quick schemes simply because they want to be wealthy at any cost. They usually are seeking to make some type of profit with little investment. Many people also fall for schemes because it sounds good and the scheme has excellent marketing which helps us to fall for these schemes, with lack of research. Correct Answer: n/a ********************************************************************************************************** 9. Over the past 5 to 8 years, investors have been forced to look for ways to squeeze additional income from their investment portfolios. Do you think investing in corporate bonds or quality stocks is the best way to increase income? Why or why...
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...place after modifying an existing building, where Jell-O was manufactured and by using available capacity of Jell-O agglomerator. Cost for the key machine was not included in the project. On the basis of test market experience, once the product is introduced, it was expected to capture a 10% of dessert market share, 80% of which would come from growth in total dessert market share and 20% of which would come from erosion of Jell-O sales. There are basically four categories of capital investment project proposals at General Foods corporation: (1) safety and convenience; (2) quality; (3) increase profit; and other. Super project was considered into third category, as a profit-increasing project. Crosby Sanberg, a manager of financial analysis at General Food Corporation calculated return on investment in three different ways of on Super Project. The first technique was Incremental basis, which projected Super project would have an attractive return of 63% in 7 years, which in-turn could directly identify with the decision to product Super. The second technique was Facilities-Used Basis, which consider after using half of an existing agglomerator and two-thirds of an existing building, pre-existing Jell-O equipment. It projected Super project would have a return of 34%. The third technique was Fully Allocated Basis, which accounted by increasing the cost and investment base developed in second...
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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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...Missouri State UniversityA Project Report On: | Vyaderm Pharmaceuticals | ForACC 715Instructor: Carl E. Keller Jr., Ph.D., CPABy | | Dong, Yifei,Nan, Tiewen,Zhou, Bojun | | Case Summary In 1999, the new CEO of Vyaderm Pharmaceuticals introduces an Economic Value Added (EVA) program to focus the company on long-term shareholder value. The EVA program consists of three elements: EVA centers (business units), EVA drivers (operational practices that improve EVA results), and an EVA-based incentive program for bonus-eligible managers. Over the next two years, the implementation of the program runs into several stumbling blocks, including resistance from regional managers, who push for "line of sight" EVA drivers; the difficulty of managing a large number of EVA centers; and unexpected bonus adjustments due to poor EVA performance. The decision point focuses on the competitive situation in a business unit where the sudden exit of a competitor produces an unexpected one-time windfall in earnings. Vyaderm's top managers struggle with the question of whether to adjust the EVA results to prevent demoralizing managers in future years when EVA results are likely to decline. Study Questions 1. Why does Maurice Vedrine want to implement an EVA system? What benefits or disadvantages do you see possibly occurring from the EVA system? Answer: Tom Finn, Vedrine’s predecessor, used to run the company by a mainly focus on earnings per share. But the company’s profitability...
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...Chapter 11: Reporting and Interpreting Stockholders’ Equity * Corporate Ownership * Shares of stock can be purchased in small amounts. * Ownership interests are transferable. * Stockholders are not liable for the corporation’s debts * Common stock – the basic voting stock issued by a corporation to stockholders. * Voting rights * Dividends * Residual claim – if the company ceases operations, stockholders share in any assets remaining after creditors have been paid. * Preemptive Rights – existing stockholders may be given the first chance to buy newly issued stock before it is offered to others. * Equity vs. Debt Financing * Equity financing – issuing new stock to investors * Debt financing – borrowing money from lenders * All transactions between a company and its stockholders affect the company’s balance sheet accounts only. * Common Stock Transactions * Contributed capital – reports the amount of capital the company received from investors’ contributions, in exchange for the company’s stock. * Retained earnings – reports the cumulative amounts of net income earned by the company less the cumulative amount of dividends declared since the corporation was first organized. * Treasury stock – reports shares that were previously owned by stockholders but have been reacquired and are now held by the corporation * Authorization, Issuance, and Repurchase of Stock ...
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...MEMORANDUM TO: JOHN SMITH, JD FROM: , CPA DATE: MARCH 25, 2012 SUBJECT: Recommendations of tax affairs for prospective clients John and Jane Smith Thank you for stopping by my office on Monday to discuss the relevant inquiries you and your wife Jane have while planning your 2011 tax return. I am only responding to the issues we discussed. I am confident that I can provide the best guidance to minimize your tax liability for I have been in practice for 5 yrs. As you know, there will be a billing for this consultation, but no tax return will be prepared unless an agreement is met. The issues to be discussed are as follows: 1. John Smith tax issues: a. How is the $300,000 treated for purposes of Federal tax income? b. How is the $25,000 treated for purposes of Federal tax income? c. What is your determination regarding reducing the taxable amount of income for both (a) and (b) above? 2. Jane Smith tax issues: a. What are the different tax consequences between paying down the mortgage (debt) and assuming a new mortgage (debt) for Federal income tax purposes? b. Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from John’s case? c. Does Jane have a business or hobby? Why is this distinction important? d. Would Jane (and John) realize better tax benefits if she had a separate business for her jewelry making activities? e. What tax benefits would John realize if he invested $15,000...
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