...because the price of the core raw materials increased in the first half year of 1994. The increase was 30% and this is likely to have high consequences for the company. The question in this case is how to allocate the finance and business risks. If there has to be a distribution of risks, how the CFO should hedge these risks? At first we examine the business and the finance risk of Delta calculating the below ratios. Business risk Based on exhibit 8, which shows the industry growth rates, we can observe that the industry growth rate has declined in the end of the 80’s and since then it is around 3%. Based on this information we conclude that Delta cannot expect a high growth rate in the next few years. ROA=net income/total assets ROA(1993)=-3.7% ROA(1992)=-6.6% We cannot compare the ROA of Delta with the ROA of other companies in the industry but we can compare it to the previous years. Although ROA is negative in 1993 there has been an improvement since 1992. The negative ROA in 1993 shows that the company is still not profitable relative to its total assets. Finance risk Short term Current ratio=current assets/current liabilities which refers to the short term solvency of the company. Current ratio=2.76 This ratio shows that the company can finance it debt on the short term. Long term The Debt Ratio measures the percent of total funds provided by creditors. Debt includes both current liabilities and long-term debt. Debt ratio=debt/total assets=0.66 Therefore...
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...University of La Verne College of Business & Public Management BUS 330 Business Finance Online Summer 2016 Assignment #3 This work is due on Sunday July 31 at Midnight. Please post your work file, with your name in the file title, to the Assignment #3 file folder in the Assignments folder in Blackboard. This work represents 5% of your course grade. Question #1: WACC & Capital Budget Analysis – 60% Based on the inputs below prepare a capital budget analysis for this Base Case using the Net Present Value, Internal Rate of Return, Profitability Index and Payback in years methods, determining whether the project is feasible. Please show your spreadsheet calculations and your final determinations of “go” or “no go” on the project. Use your Investment Return Analysis as an example for this capital budget analysis. Project Inputs: WACC – Debt is 75% and Equity is 25% of this firm’s capital structure. Interest rate on the debt is 7.5%, firm’s tax rate is 30%. Firm’s beta is 1.25, Risk Free Rate is 2.0%, Market Return Rate is 11.0%. Project Investment Outlay, Year 0 - $1,000,000 Project Investment Life – 10 years Project Depreciation - $100,000 / year Project Salvage Value - $30,000 Working Capital Base of Annual Sales – 10% Expected inflation rate per year – 3.0% Project Tax Rate – 30% Units sold per year – 40,000 Selling Price per Unit, Year 1 - $40.00 Fixed operating costs per year excluding depreciation - $175,000 Manufacturing (Variable) costs...
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...October 17, 2014 October 17, 2014 zainab Mohammed – Nour hamdan – batool bushail – fathea alsomali zainab Mohammed – Nour hamdan – batool bushail – fathea alsomali FINANCE IN EMERGING MARKET – FIN 798 - 126 basix FINANCE IN EMERGING MARKET – FIN 798 - 126 basix The BASIX case as I believe is very interesting case because BASIX positions itself remarkably as microfinance or as other may call it a rural livelihoods promotions institution (outstanding institution). It has a strong leadership skills, strong culture as well and most of all a strong process. This institution was targeting borrowers at remote locations, theses borrowers are approximately 60,000 borrowers distributed across 4000 villages upon 30 district, and these areas considered rural areas. In addition, these borrowers either represented themselves or represented a group of several clients, which made them more reliable for all the members. The minority non – borrowers were buying life and weather insurances. Most of BASIX clients were working in agriculture with varying household and income and the few remaining of the borrowers were not working in agriculture (self-employed), and the labor’s wages depended on wages solely and they were rare). Nevertheless, BASIX had so many challenges and risks associated with their aim. For instance living in rural areas would suggests that the financial services are not available. In addition, because most of the borrowers are working...
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...ASSESSMENT TASK-1 CASE STUDY SALES BUDGET ITEM JANUARY FEBRUARY MARCH TOTAL 1. $30,000 30000+(10/100×30000) = $33,000 33000+(50/100×33000) = $49,500 $112500 OPERATING EXPENSES BUDGET Operating expenses SALES JANAURY FEBRUARY MARCH Salary to partners 9167 9167 9167 Salary to others 6667 6667 6667 Stationery 167 167 167 Electricity 100 100 100 Travel 600 660 990 Bank charges 133 133 133 Phone 240 240 240 Rent 1800 1800 1800 Total 18874 18934 19264 Other expenses Depreciation 167 167 167 Advertising 300 330 495 Total 467 497 662 Total expenses 19341 19431 19926 Total = 58698 CASH FLOW BUDGET ITEMS JANUARY FEBRUARY MARCH TOTAL Cash at Bank 12,000 22,826 36,562 12000 Sales revenue 30,000 33,000 49,500 112,500 Total 42,000 55,826 86,062 124500 Less cash payment 19,174 19,264 19,759 58197 Depreciation 22826 36562 66303 125691 BUDGETED INCOME STATEMENT ITEMS AMOUNTS Sales revenue 112500 Less operating expenses 55098 Net profit 55098 CASE STUDY PART B DUTIES SPECIFIC ORGANISATIONAL INFORMATION, SUPPORT, RESOURCES REQUIRED INVOICING It will involve request and purchase order of the company. A document should be there which will have all the information related to sales and transactions. All the payments will be stated in the invoice. PURCHASE ORDERS This is the first official order issued by the company to a customer. So basically it will create an agreement between company and customer that the deal is made. PROCESSING CHEQUES...
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...Investment Valuation Assignment On Altman’s Z-Score Submitted By: A Sreekanth Vidyasagar Garvit Sharma A Dixit Altman Z-score The Z-score formula for predicting bankruptcy was published in 1968 by Edward I. Altman, who was, at the time, an Assistant Professor of Finance at New York University. The formula may be used to predict the probability that a firm will go into bankruptcy within two years. Z-scores are used to predict corporate defaults and an easy-to-calculate control measure for the financial distress status of companies in academic studies. The Z-score uses multiple corporate income and balance sheet values to measure the financial health of a company. Z score bankruptcy model: Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + .999X5 Explanation X1: The Working Capital/Total Assets (WC/TA) ratio is a measure of the net liquid assets of the firm relative to the total capitalization. Working capital is defined as the difference between current assets and current liabilities. Ordinarily, a firm experiencing consistent operating losses will have shrinking current assets in relation to total assets. Altman found this one proved to be the most valuable liquidity ratio comparing with the current ratio and the quick ratio. This is however the least significant of the five factors....
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...Project Financing Asset-Based Financial Engineering Second Edition JOHN D. FINNERTY, Ph.D. John Wiley & Sons, Inc. Project Financing Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding. The Wiley Finance series contains books written specifically for finance and investment professionals as well as sophisticated individual investors and their financial advisors. Book topics range from portfolio management to e-commerce, risk management, financial engineering, valuation, and financial instrument analysis, as well as much more. For a list of available titles, visit our Web site at www.WileyFinance.com. Project Financing Asset-Based Financial Engineering Second Edition JOHN D. FINNERTY, Ph.D. John Wiley & Sons, Inc. Copyright C 2007 by John D. Finnerty. All rights reserved Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. Wiley Bicentennial Logo: Richard J. Pacifico No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States...
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...June 3, 2014 GE Tuesday Training GECA- GE Capital Americas: * Many business segments within this vertical. Leasing transactions that are smaller in monetary size; 25 million is max deal. * Healthcare, financial services, financing equipment, venture capital deals, fleet services, equity financing. * Equipment Financing: Loans, Leasing, Sale Leasebacks, Equipment Management and Remarketing * Vendor Financing: solutions to enhance manufactures management position. * Franchise Financing: Financing new locations, acquisitions, reimaging, debt restructuring, refinancing. Franchise restaurants, chain restaurants and limited service hotels. * Fleet Services: rental car companies where they want to lease fleets of vehicles; 400-500 cars. Vehicle financing through remarketing (max return on total fleet investment). * Inventory Financing: Inventory financing through wholesaler and dealer side; 2-sided position by financing creation of vehicle by wholesaler and purchase of vehicle by the dealer who will then sell to public. * Rail Services: Rail cars based out of Chicago; easy business model to make money (leases that are longer in time). Sale Leaseback leasing option (take the fleet that were sold back and get the most revenue can by auctioning; an additional revenue generating service at GE). * CRE: mortgages GECB- GE Capital Bank: * How fund different deals; depends on collateral and the type of transaction (offers alternative services instead...
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...84 0.60 0.59 0.58 Net profit margin 0.14 0.14 0.15 0.21 0.20 0.29 Operating profit margin 16.96 18.86 19.44 36.60 35.37 32.75 Profit before tax margin 15.12 16.91 17.20 32.29 31.53 29.81 Total assets turnover ratio 0.69 0.64 0.60 0.66 0.62 0.53 Equity turnover ratio 1.29 1.31 1.39 -2.59 -25.72 5.79 3. 10% Stake in Intercontinental Hotels Group PLC Disciplined approach to allocation of capital. In support of company’s asset-light strategy, during 2014 company: Disposals • Completed the disposal of 80 per cent of our interest in Intercontinental New York Barclay for $274 million; • Sold Intercontinental Mark Hopkins San Francisco for $120 million; and • Announced a binding offer in respect of Intercontinental Paris – le grand for €330 million ($406 million). Acquisition • Announced the acquisition of Kimpton hotels & restaurants for $430 million – a fully asset-light business. This acquisition completed in January 2015. (IHG, Annual Report, 2014) IHG’s Financial Position - Strong yearly RevPAR execution with worldwide similar RevPAR up 6.1% was drove by 7.4% development in the Americas in 2014. Q4 worldwide practically identical RevPAR development was 5.1%, from which 7.0% development was seen in America. - Total $23bn gross income from hotels in IHG's structure was up by 6% year than previous year. - Underlying fee income up by 7% and operating income up by 10% determined by solid exchanging and improved productivity. Reported operating profit decrease by 3% reflecting...
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...Does your career plan include a world of lifelong success? Program of Professional Studies THE CERTIFIED GENERAL ACCOUNTANTS ASSOCIATION OF BRITISH COLUMBIA We see more than numbers. Choose a career that places you on the path to lifelong success. It’s all about opportunity. Accounting professionals can work in any sector, anywhere in the world. And when you choose CGA, you’ll gain the leadership, problem-solving and technical skills that are sought after by organizations in the private, public and not-for-profit sectors. The CGA Program of Professional Studies gives you the tools to succeed in business, no matter where your career takes you. You’ll enter the workforce with the applied knowledge and demonstrated expertise that employers want, including specialized technical knowledge, sectorspecific competencies, problem-solving skills and the ethical integrity to lead. CGA’s competency-based curriculum is simply your best way to prepare for a rewarding career in financial management. Flexible study options and the freedom to choose the career you want CGA is all about choice. You choose the professional-studies path and real-world experience that best match your career goals and interests. We give you the skills and freedom to work in any type of organization, in any industry, at any level of management. With a CGA designation, your opportunities—both professional and personal, at home and around the world—are limitless. Take your place as a highly respected...
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...Accounting Horizons Vol. 27, No. 2 2013 pp. 301–318 American Accounting Association DOI: 10.2308/acch-50434 Capital Structure, Earnings Management, and Sarbanes-Oxley: Evidence from Canadian and U.S. Firms Kelly E. Carter SYNOPSIS: I examine Sarbanes-Oxley’s (SOX) effect on capital structure. I find that SOX is associated with higher long-term debt ratios, as firms listed in the U.S. raise their long-term debt ratios by 2 to 3 percentage points. This finding is consistent with the idea that, although the reduction in information asymmetry associated with SOX could prompt managers to increase equity financing, debt is still safer and less costly than equity in the SOX era. Further analysis shows that the increase in debt occurs in the two quarters prior to SOX, suggesting that firms anticipate a higher cost of debt after SOX and acquire debt while it is relatively cheap. Also, firms that heavily (lightly) manage earnings prior to SOX use less (more) debt after SOX. This result is consistent with the view that firms that aggressively manage earnings before SOX reveal intrinsically weaker earnings after SOX, casting doubt on those firms’ ability to repay debt and relegating those firms to issue equity for financing purposes. Keywords: capital structure; earnings management; debt ratio; Sarbanes-Oxley. JEL Classifications: G32; G38. Data Availability: Data available upon request. Kelly E. Carter is an Assistant Professor at Morgan State University. I...
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...Chapter 27 The Basic Tools of Finance TRUE/FALSE 1. If the interest rate is 8 percent, then the present value of $1,000 to be received in 4 years is $735.03. ANS: T DIF: 2 REF: 27-1 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Present value MSC: Applicative 2. If a savings account pays 5 percent annual interest, then the rule of 70 tells us that the account value will double in approximately 14 years. ANS: T DIF: 2 REF: 27-1 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Compounding MSC: Applicative 3. The present value of $100 to be paid in two years is less than the present value of $100 to be paid in three years. ANS: F DIF: 1 REF: 27-1 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Present value MSC: Analytic 4. The future value of $1 saved today is $1/(1 + r). ANS: F DIF: 1 REF: 27-1 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Present value MSC: Analytical 5. The present value of any future sum of money is the amount that would be needed today, at current interest rates, to produce that future sum. ANS: T DIF: 1 REF: 27-1 NAT: Analytic LOC: The Study of economics, and definitions of economics TOP: Present value MSC: Interpretive 6. The sooner a payment is received and the higher the interest rate, the greater the present value of a future payment. ANS: F DIF: 1 REF: 27-1 NAT: Analytic LOC: The Study of...
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...Instructor’s Manual Fundamentals of Financial Management twelfth edition James C. Van Horne John M. Wachowicz JR. ISBN 0 273 68514 7 Pearson Education Limited 2005 Lecturers adopting the main text are permitted to photocopy the book as required. © Pearson Education Limited 2005 Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk Previous editions published under the Prentice-Hall imprint Twelfth edition published under the Financial Times Prentice Hall imprint 2005 © 2001, 1998 by Prentice-Hall, Inc. © Pearson Education Limited 2005 The rights of James C. Van Horne and John M. Wachowicz JR. to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patent Act 1988. ISBN: 0 273 68514 7 All rights reserved. Permission is hereby given for the material in this publication to be reproduced for OHP transparencies and student handouts, without express permission of the Publishers, for educational purposes only. In all other cases, no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publishers or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road...
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...Angelica Lopez BUS 330 Business Finance Online Road King Trucks Case Paper Instructor Richard Hasse March 15, 2015 Outline Summary Mission Objectives Paper Road King Trucks Road King Trucks, Inc has been in business since 1880 and it specializes in transportation. The company was establised by the Smith brothers and it manufactured wagons. With the advance technologies and keeping up with the population they started manufacturing school buses in 1940. The school buses accounted for 50% of it's revenues. Michael Livingston is a newly hired CEO of Road King Trucks, Inc. and he's proposing a new product to the top management, chief design and manufacturing engineers. How much inportantce should be given to the energy cost situation? What are the project's cash flows for the next twenty years? What assumptions did you use? What is the company's cost of capital? What is the appropriate discount factor for you to use in evaluationg the bus project? If you decide to go ahead with the project, which of the two engines should be used in the bus, and why? Evaluate the quality of the project, by using appropriate capital budgeting techniques. Would you recommend that Road King Trucks accpet or reject the project? What are the key factors on which you base your recommendation? Capital is the source of fiancé through which resources are provided. It may be debt financing or equity financing. The cost of debt financing is interest which is the before...
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...Instructor’s Manual Fundamentals of Financial Management twelfth edition James C. Van Horne John M. Wachowicz JR. ISBN 0 273 68514 7 Pearson Education Limited 2005 Lecturers adopting the main text are permitted to photocopy the book as required. © Pearson Education Limited 2005 Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk Previous editions published under the Prentice-Hall imprint Twelfth edition published under the Financial Times Prentice Hall imprint 2005 © 2001, 1998 by Prentice-Hall, Inc. © Pearson Education Limited 2005 The rights of James C. Van Horne and John M. Wachowicz JR. to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patent Act 1988. ISBN: 0 273 68514 7 All rights reserved. Permission is hereby given for the material in this publication to be reproduced for OHP transparencies and student handouts, without express permission of the Publishers, for educational purposes only. In all other cases, no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publishers or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road...
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...Instructor’s Manual Fundamentals of Financial Management twelfth edition James C. Van Horne John M. Wachowicz JR. ISBN 0 273 68514 7 Pearson Education Limited 2005 Lecturers adopting the main text are permitted to photocopy the book as required. © Pearson Education Limited 2005 Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk Previous editions published under the Prentice-Hall imprint Twelfth edition published under the Financial Times Prentice Hall imprint 2005 © 2001, 1998 by Prentice-Hall, Inc. © Pearson Education Limited 2005 The rights of James C. Van Horne and John M. Wachowicz JR. to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patent Act 1988. ISBN: 0 273 68514 7 All rights reserved. Permission is hereby given for the material in this publication to be reproduced for OHP transparencies and student handouts, without express permission of the Publishers, for educational purposes only. In all other cases, no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publishers or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road...
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