...As a branch of finance, managerial finance is concerned with assessing financial techniques used in organizations and public institutions in an effort to determine how they affect both internal and external business processes. In essence, managerial finance mix managerial and elementary corporate financial aspects to better organizations’ operations, minimize loses and implement change. As opposed to the technical financial approach, managerial finance seeks to analyze available financial information or data and then derive their inherent meaning in regard to the long term survival of a business. This paper seeks to explicate the role of managerial finance and their implication to the survival of contemporary business enterprises. Financial statements are instrumental to internal users in that it helps them to make key business decisions. Such users include business owners, employees, managers and other stakeholders with a direct interest in an organization. Performing financial analyses on such statements helps such parties to gain an in depth understanding on their implications to internal decision making processes. On the other hand, external users require financial analysis to make decisions regarding their investments in a given organization. These include the government, banks and other financial partners as well as potential investors. Following the above discussion, governments will always ask for financial statements to evaluate or ascertain how an organization...
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...Business 530 Managerial Finance Kohl's Great Things are Expected from Kohl’s When looking at an organization to invest with, there are several things that must be evaluated in order to make a decision to believe in and have faith in this decision. The history and leadership of Kohl’s paints a picture that their organizational leadership believes in what they do, believes in the organization’s people, the communities that they serve, and serves as an intelligent choice for long term investing; thus, living and breathing their motto of “Expect Great Things” (S&P Net Advantage, 2012). The current President and CEO of Kohl’s, Kevin Mansell, has held many positions within the publicly traded company and has witnessed extensive growth over his twenty-seven years with the organization (Press Room, 2012). Kohl’s CFO, Wesley McDonald, also has a very impressive employment history within the retail industry over the past two decades. A good beginning to his career, McDonald worked for Target, CFO of Abercrombie & Fitch, and is currently serving as the Senior Executive Vice President and CFO of Kohl’s with a financial interest regarding the success of the company, owning 123,700 stocks (Forbes, 2012). Together these men...
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...Managerial Finance FIN515 Homework1 Mini case (a) Corporate Finance Investors provide enough funding for corporations to make quality goods and services that are highly valued by costumers and enables growth of the corporation. So managers’ primary goal is to generate enough cash to distribute compensation to investors. Understanding corporate finance allows managers to make monetary decisions that achieve the goal of adding value for investors and thus contribute to a company’s competitiveness and profitability in long run. (b) Organizational Forms There are three types of organizational forms for companies to choose based on different expected speed of growth and the amount of owners. The easiest way to start a business is to begin as a proprietorship, which is owned by one person. It subjects to the minimum amount of government regulations and tax liability. However, the life proprietorship is limited to the life of owner. The owner is subject to unlimited liability. Also, founder is hard to raise capital for a proprietorship to meet growth requirements. If a company has two or more owners, it forms a partnership. Owners of partnership companies are also liable for all the debt. However, limited partnership allows limited owner liable to the amount he invested. Partnership is subject to less regulation and tax but harder to raise capital than corporation. Corporation is the only legal entity that is separated from owners and managers. Even though it is complicated...
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...Cash Flow Projection When increasing sales levels or investing in a new project, there are key areas to address in the cash flow assumptions. First the cash flow projections include depreciation. IRS accelerated depreciation allows for quicker write-off of assets, lowering taxable income and reducing tax expense. So, high depreciation expense in the early years will increase project cash flows in these years through the depreciation tax shield. Note: the depreciable base includes asset cost, installation and shipping. The depreciation schedule for an asset does not correspond with the physical life of a project, and the economic life of the project is tied to the project life- which is dependent on the timeframe which maximizes firm value. So projects in mining, for example, may terminate the project at which point operations no longer enhance firm value. The asset will then be sold for market value resulting in a cash inflow for the project at project end. Second, the cash flow projections integrate income and capital gain taxation. The discount rate will reflect the after-tax cost of capital, which includes the tax shield on firm interest expense. If an asset has salvage value at the end of the project, the price received will be reduced by taxable gain. Third, the change in operating working capital is part of the initial investment at the start of the project. And when the project terminates, this investment in working capital is returned as a cash inflow. As...
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...LEARNING ASSIGNMENT 1 UNIT 3 QUESTIONS 1. Explain the law of diminishing marginal returns? 2. Explain the following terms: a. Isoquant b. Marginal rate of technical substitution c. Isocost and what is the composition of this equation. 3. How do we determine the optimum level of for two inputs in the long run? 4. How do we determine the optimal level of a single input in the short run? Graph 1 K E D F C Q3 B Q2 A Q1 LABOR Above graph represents isoquants and isocost curves. On the vertical axis we find capital and on the horizontal axis labor. 1. Which points in Graph 1 represent technical efficiency? What condition is true at these particular points? 2. If output elasticity is less than 1, what information does it provide to the manager? Exercise 1 In Graph 2 we see the long run as well as short run expansion path for Maurice & Thomas Corporation. The price of capital (K) is $60 per unit and the price of labor...
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...Problem Set #1 Managerial Finance Problem #1: You are forming an investment club with your friends and need to determine what type of business form to take. Your friends and you are considering a corporation, but are having some doubts. A consultant comes in and gives advice. What do you think s/he would say? ANSWER: There are a lot of ‘correct’ answers here. This list is not exhaustive. If you suggested a partnership, you should have written about double taxation of corporations as a downside. Perhaps you could have mentioned that the club’s investments may have limited liability so there wasn’t need for liability protection. For the corporation suggestion, obviously the big reason would be limited liability. (You may sue each other if things go badly or well.) Finally, a sole proprietorship wouldn’t work here because there is more than one of you. Problem #2: Discuss briefly (couple of sentences) why it may be more useful for a financial manager to look at NOPAT instead of Net Income (EAT). ANSWER: NOPAT allows financial managers to analyze financing decisions and operations separately. Net Income can include effects from financing choices, such as interest expenses. By looking at NOPAT, financial managers get a sense of how firms are performing without clouding the analysis with other factors. Problem #3: Compute the managerial income statements and balance sheets as well as ratios for P&G for 2007 and 2008. (See other PDF) ANSWER: See other slides. Problem...
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...Principles of Managerial Finance The Prentice Hall Series in Finance Adelman/Marks Entrepreneurial Finance Andersen Global Derivatives: A Strategic Risk Management Perspective Bekaert/Hodrick International Financial Management Berk/DeMarzo Corporate Finance* Berk/DeMarzo Corporate Finance: The Core* Berk/DeMarzo/Harford Fundamentals of Corporate Finance* Boakes Reading and Understanding the Financial Times Brooks Financial Management: Core Concepts* Copeland/Weston/Shastri Financial Theory and Corporate Policy Dorfman/Cather Introduction to Risk Management and Insurance Eiteman/Stonehill/Moffett Multinational Business Finance Fabozzi Bond Markets: Analysis and Strategies Fabozzi/Modigliani Capital Markets: Institutions and Instruments Fabozzi/Modigliani/Jones/Ferri Foundations of Financial Markets and Institutions Finkler Financial Management for Public, Health, and Not-for-Profit Organizations Frasca Personal Finance Gitman/Joehnk/Smart Fundamentals of Investing* Gitman/Zutter Principles of Managerial Finance* * denotes Gitman/Zutter Principles of Managerial Finance— Brief Edition* Goldsmith Consumer Economics: Issues and Behaviors Haugen The Inefficient Stock Market: What Pays Off and Why Haugen The New Finance: Overreaction, Complexity, and Uniqueness Holden Excel Modeling and Estimation in Corporate Finance Holden Excel Modeling and Estimation in Investments Hughes/MacDonald International Banking:...
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...Question: 1. Locate the annual balance sheets for General Motors (GM), Merk (MRK), and Kellogg (K). For each company calculate the long term debt-equity ratio for the prior two years. Why would these companies use such different capitals structures? 2. Look up a company and download the annual income statements. For the most recent year, calculate the average tax rate and EBIT, and find the total interest expense. From the annual balance sheets calculate the total long-term debts (including the portion due within one year). Using the interest expense and total long term debts, calculate the average cost of debt. Next, find the estimated beta for the company on the S&P Stock Report. Use this reported beta, a current T-bill rate, and the historical average market risk premium found in a previous chapter to calculate the levered cost of equity. Now calculate the unleveraged cost of equity, then the unlevered EBIT. What is the unlevered value of the company? What is the value of the interest tax shield and the value of the levered company. Answer: |Company name/Year |Debt-equity ratio 2010 |Debt-equity ratio 2011 | |General Motors (GM) |0.28 |0.31 | |Merck (MRK) |0.28 |0.28 ...
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...Alicja Nowak-Igwe ID D03509235 FI 516 Advance Managerial Finance Mini Case a) Provide a brief overview of capital structure effects. Identify the ways in which capital structure can affect the WACC and FCF. Capital structure presents how a company finance its operations. It is expressed as percentage of debt, preferred stock, common equity used in financing a company's operations.[1] WACC calculates a company'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.”[2] “WACC depends on percentage of debt and common equity (wd) and (ws), the cost of debt (rd) and cost of stock (rs ) and the corporate tax rate (T)”.[3] WACC = wd(1 – T)rd + wsrs The effect of debt on WACC and Free Cash Flow is influenced by impact of the capital structure on value.[4] Capital structure affects the WACC and FCF of a company in many ways. The debt holders have a right to a cash flow before shareholders, which means that dividend can't be paid out unless all obligations toward debt holders for the specific period of time are met. Because of that, the cost of stock, rs goes up.[5] A high debt increases the risk of bankruptcy for a company, which might able to meet all payments. This risk of bankruptcy causes pre-tax cost of debt, rd, to increase.[6] In addition, increased risk of bankruptcy reduces ed free cash flow, which can be...
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...Executive Summary Henkel AG is a worldwide company, which headquarter is located in Düsseldorf, Germany. Since 1876, holds a well-known leading market positions in both industrial and consumer businesses. It employs around 47,000 people, from at least 6 different areas worldwide. The company has brands and technologies which focused in three globally operating areas: Laundry & Home Care, Beauty Care and Adhesive technologies (Henkel AG & Co. KGaA, 2012). From 2012 their sales values has recorded 3.410 million euros, gross profit of 1.073 million euros and a net income which had a major increase from 32 million euros made in 2011 to 591 million euros en 2012, following (Henkel AG & Co. KGaA, 2012). Fortunately, with a constant increase that the company have been having from its current assets, potential investor might be tempted to follow from close the progress of Henkel. This essay is also gives Henkel AG a much closer look of some of the financial values of the company in order to explain its progress to help having a better perspective of how are the performance management being a support for its evolution to incentive even more current and potential investors. Table of content Introduction 4 Cost of Equity 5 Market Beta 7 Cost of Debt 14 Weighted Average Cost of Capital (WACC) 17 Conclusion 18 References 19 Appendix 21 Introduction Due to the current economic status quo of business markets worldwide...
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...PRINCIPLES OF FINANCE 1303 FALL SEMESTER 2014 16-WEEK SEMESTER 1. Instructor Information: Professor: Jake Costin Office: Rio Grande Campus Phone: 512.461.4151 E-mail: jcostin@austincc.edu Office Hrs: 8:40 to 9:40 (after class or by appointment) 2. Course Description: BUSG 1303 PRINCIPLES OF FINANCE (3-3-0). Personal and business financial dynamics including monetary and credit theory, cash inventory, capital management, and consumer and government finance with emphasis on the time value of money. Skills: R ( ) Course Type: W 3. Required Textbooks/Materials: “Principles of Managerial Finance” Brief 6th Edition by Lawrence J. Gitman 4. Instructional Methodology: Instruction will be based on lectures and the required reading from the required text. All tests will be given in the classroom during class times. 5. Course Rationale: The course will provide an overview of managerial finance with focus on important concepts such as: the time value of money, risk and return, interest rates, and stock and bond valuations. Additionally, consideration will be given to both long and short term investment and financial decisions. 6. Course Objectives: Understand the following: a. Financial Statement Analysis b. Cash Flow and Financial Planning c. Time Value of Money d. Risk and Return e. Interest Rates, Stock and Bond Valuations f. Capital Budgeting g. Cost of Capital ...
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...Name: Hany Samuel William Why do I study Managerial Finance? MBA in Finance Telecom Egypt Company It gives me much pleasure to give a snapshot on the benefit of studying this course, Managerial finance. I can get the best use of this course not only on my career path but also on my personal life. First, regarding my career path, I am working in the payroll department in Telecom Egypt and actually I cannot find my passion in this field but really I adore the field of finance and investment so I studied a post-graduate diploma in investment and Finance Management also I am studying MBA now and I will specialize in finance to be qualified to change my career, inside Telecom Egypt or outside it, into the field of investment and finance specially the financial analysis. Secondly, regarding my personal life I would like to enter the field of stock market but not as an employee but as an investor so managerial finance course taught me how to analyze the securities, how to calculate the return of each security, how to calculate the expected return, how to maximize my wealth and how to minimize the risk. This course gave me the knowledge of how to depend on myself in making the decision of buying and selling in the stock market not just depending on the advices of brokers who may cheat me for a certain reason specially in the atmosphere of speculation happening nowadays in the Egyptian stock market...
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...MBAA 518 Managerial finance Final Paper https://homeworklance.com/downloads/mbaa-518-managerial-finance-final-paper/ Write a short concise stock recommendation report for a firm in which you would recommend as a buy. You are correct that this is not an investments class but as you take a look at the examples provided you will see the application of various topics studied in this course. You will see ratios discussed, discounted cash flow valuation applied, growth opportunities analyzed and ultimately whether or not the investment opportunity is one that should be pursued. This investment opportunity and determining the risk, reward and valuation all are discussed throughout this course . Your paper will be in the range of 2 to 3 pages formatted similarly to the examples provided. References must be included and those should be referenced using the latest APA guidelines. Must include a brief discussion of the industry and industry outlook and where the firm being analyzed stands and performs in the industry. You will not that ratio analysis is often used but the ratios may vary by industry. In other words the key ratios used to analyze firms in industry “A” are not the same ratios used to analyze firms in industry “B”. Valuation is often considered using more than one method. Discounted cash flows may be used in conjunction with an appropriate ratio (again the ratio likely varies across industry). How does the current share price compare to what your analysis values the...
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...FIN-515 (Managerial Finance) Project Part A May 20, 2016 This paper is aimed at examining the financial statements of two companies namely Coca Cola and Pepsi which produce almost similar products, listed in the same stock market and fall within the same industry group. The rivalry between the two companies dates back a century and this debacle sometimes get personal and resonates in their marketing. The Pepsi brand suffered bankruptcy twice in its lifetime but made enormous strides to keep standing, making some important decisions such as expanding their portfolio in the food industry allying with Frito Lay, and becoming Coca Cola’s main competitor and currently positioned as the world’s fourth-largest food and Beverage Company. Both brands have established a differentiated brand image that is well-known around the world but making evident their rivalry. With both companies listed in the New York Stock Exchange, the debate and competition between the two is as old as the brands themselves. While many will dispute about which taste better, the argument has washed over into which company’s stock investors should own as well. Recent past performance has crowned Pepsi the winner, with Pepsi total returns trending nearly double that of Coke in the past five years. Some of the critical financial ratios used by investors in making the necessary financial investment decision will be examined in both cases using the income statement, balance sheet and cash flow statement...
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...Grade Details - All Questions | 1. | Question : | (TCO C) Blease Inc. has a capital budget of $625,000, and it wants to maintain a target capital structure of 60 percent debt and 40 percent equity. The company forecasts a net income of $475,000. If it follows the residual dividend policy, what is its forecasted dividend payout ratio? (a) 40.61% (b) 42.75% (c) 45.00% (d) 47.37% (e) 49.74% | | | | Instructor Explanation: | Answer is: d Text: pp. 570-572 - Residual Dividends, Chapter 14 Capital budget $625,000 Equity ratio 40% Net income (NI) $475,000 Dividends paid = NI - (Equity ratio)(Capital budget) $225,000 Dividend payout ratio = Dividends paid/NI 47.37% | | | | Points Received: | 10 of 10 | | Comments: | | | | 2. | Question : | (TCO F) Chocolate Factory's convertible debentures were issued at their $1,000 par value in 2009. At any time prior to maturity on February 1, 2029, a debenture holder can exchange a bond for 25 shares of common stock. What is the conversion price, Pc? (a) $40.00 (b) $42.00 (c) $44.10 (d) $46.31 (e) $48.62 | | | | Instructor Explanation: | Answer is: a Chapter 19: pp. 770-774 Par value: $1,000.00 Conversion ratio: 25.00 Conversion price = Par value/Conversion ratio = $40.00 | | | | Points Received: | 10 of 10 | | Comments: | | | | 3. | Question : | (TCO B) Ang Enterprises has a levered beta of 1.10, its capital structure consists of 40 percent debt...
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