...Merger of Equals Section 2 Yang LIU Student No. 5363940 Xiaoyi YAN Student No. 5363999 Yiding ZHAO Student No. 5516778 Zhuyun FANG Student No. 5484118 5P60 – Accounting Theory Professor Fayez A. Elayan Due Date: April 11, 2014 I. Background During the last decades, the merger and acquisition happened in the constantly developing economy, primarily deriving from the United States. Since the financial crisis happened in 2008, most companies in the world faced risks and losses; however they also had challenges and opportunities. Meanwhile merger and acquisition gave them the opportunity to get rid of the risks and losses that in turn allowed them to redevelop. Merger of equals became a new mode of merger and acquisition in recent years, which plays a significant role in the current global market. It is known that, merger of equals have been on the rise in order allow for sustainable and fast development. There are many reasons why companies’ merge and some examples could be illustrated to prove the points of views. The purpose of the merger of equals is to keep equality amongst the companies. Specifying the expectations of the merger is often a large part of the merging process. Since the trend of merger of equals is more and more popular, we wonder why merger of equals becomes so important in our daily. Unfortunately, there are few research about merger and equals, especially the influence on earning quality. Through all the literatures...
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...returns for the following: Kraft Foods, Inc., Walt Disney, Co., and the S&P 500 index. This report will be conducted by first calculating and analyzing descriptive statistics, which include measures of central tendency and dispersion. The calculations for these statistics were conducted in an excel worksheet and reported in a summary fashion in this report. The analysis will also include the distribution and confidence intervals for each company, along with an analysis of those findings. A hypothesis test was conducted on all three data sets in order to establish that the mean values were credible. Finally, a regression analysis was done to see if there was a relationship between each company and the S&P 500 index. All of the tables that are referenced can be located in Appendix A and all of the figures that are referenced can be found in Appendix B. Based on this analysis, it was concluded that both companies had outliers that may have distorted some calculations. It was also concluded by issuing a hypothesis test that both companies and the index have sample means that adequately represent the population mean. It was found that the monthly returns of both Walt Disney and Kraft Foods had a positive, or direct, relationship with the monthly returns of the S & P 500 index. The first section of this report will contain a description of the data, which includes measures of central tendency and dispersion. The next section will include calculations of distribution and confidence...
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...securities on margin, an individual’s effective interest rate is probably no higher than that for a firm. Therefore, this assumption is reasonable when applying MM’s theory to the real world. If a firm were able to borrow at a rate lower than individuals, the firm’s value would increase through corporate leverage. As MM Proposition I states, this is not the case in a world with no taxes. 2) There are no taxes. In the real world, firms do pay taxes. In the presence of corporate taxes, the value of a firm is positively related to its debt level. Since interest payments are deductible, increasing debt reduces taxes and raises the value of the firm. 3) There are no costs of financial distress. In the real world, costs of financial distress can be substantial. Since stockholders eventually bear these costs, there are incentives for a firm to lower the amount of debt in its capital structure. This topic will be discussed in more detail in later chapters. 2. False. A reduction in leverage will decrease both the risk of the stock and its expected return. Modigliani and Miller state that, in the absence of taxes, these two effects exactly cancel each other out and leave the price of the stock and the overall value of the firm unchanged. 3. False. Modigliani-Miller Proposition II (No Taxes) states that the required return on a firm’s equity is positively related to the firm’s debt-equity ratio [RS = R0 + (B/S)(R0 – RB)]. Therefore, any increase in the amount of debt in...
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...balance sheet and the income statement at 31,July 2006. Firm value can also be regarded as the sum of the value of all assets – where asset value is given by the discounted cash flow resulting from the operation of the asset (Damadoran, 2012). It is given the information about the firm asset valuation method. The skiing company generates cash flow, since the skiing equipment rent by the customers. The company asset value is depending on the future cash flows generated by the equipment rental. So we use discount cash flow to calculate the asset and firm value. First step is calculating the expected present value of future cash flow at time 2005 and 2006. Given the ideal condition, we use the state of nature and their probability to determine the present value. The basic idea is that we do not know which state will occur until the period end. The formula like this. 900 is for snowy weather, the probability is 0.7, and 300 is for not snowy weather, the probability is 0.3. do some calculation, the result is 1377.7. Similarly, the present value at time 2006 is 699.03 The second step is prepare the income statement for 31,06,2006. When the company bought the skiing equipment in 2005, they borrowed $500 loan from bank. So in 2006, it generate loan interest $15 by the interest rate is 3%. Also, from the question, we know the pay out dividend is $50. Thus, in the income statement, net income for the year is equal to PVo@3% equal 41.33. ‘ In here, I want to ask question about accretion...
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...(4) (5) (6) (7) (8) TIME ALLOWED - 2 HOURS TOTAL NUMBER OF QUESTIONS – 50. ANSWER ALL QUESTIONS. ALL QUESTIONS ARE OF EQUAL VALUE. THERE IS NO NEGATIVE MARKING. THIS PAPER MUST NOT BE RETAINED BY THE CANDIDATE. CANDIDATES NEED TO BRING A PENCIL AND ERASER TO THE EXAMINATION. CANDIDATES NEED TO BRING A UNIVERSITY APPROVED CALCULATOR TO THE EXAM. MATHEMATICAL TABLES ARE PRINTED AT THE BACK OF THIS EXAM PAPER. PRINT YOUR STUDENT NUMBER ON THE TOP RIGHT HAND CORNER OF THIS PAGE. ANSWER ALL QUESTIONS ON THE ANSWER SHEET PROVIDED. ALL ANSWERS MUST BE IN PENCIL. FINS 1613 Final Exam 1 T2 2009 Multiple Choice - 50 Questions: 1 mark each. 1) If a firm follows a residual dividend policy, they will give precedence to: a) b) c) d) e) maintaining their desired debt-equity ratio over paying dividends paying a constant dividend over increasing retained earnings paying dividends over accepting positive investments maintaining a constant level of debt before paying dividends avoiding dividend cuts over changing the debt-equity ratio 2) An investment project is most likely to be accepted by the payback period rule and not accepted by the NPV rule if the project has a) b) c) d) e) a large initial investment with moderate positive cash flows over a very long period of time. a very large negative cash flow at the termination of the project. most of the cash flows at the beginning of the project. all projects approved by the payback period rule will be accepted by the NPV rule. The...
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...(4) TIME ALLOWED - 2 HOURS TOTAL NUMBER OF QUESTIONS – 50. ANSWER ALL QUESTIONS. ALL QUESTIONS ARE OF EQUAL VALUE. THERE IS NO NEGATIVE MARKING. THIS PAPER MUST NOT BE RETAINED BY THE CANDIDATE. CANDIDATES NEED TO BRING A PENCIL AND ERASER TO THE EXAMINATION. CANDIDATES NEED TO BRING A UNIVERSITY APPROVED CALCULATOR TO THE EXAM. MATHEMATICAL TABLES ARE PRINTED AT THE BACK OF THIS EXAM PAPER. (5) (6) (7) (8) PRINT YOUR STUDENT NUMBER ON THE TOP RIGHT HAND CORNER OF THIS PAGE. ANSWER ALL QUESTIONS ON THE ANSWER SHEET PROVIDED. ALL ANSWERS MUST BE IN PENCIL. FINS 1613 Final Exam 1 T2 2009 Multiple Choice - 50 Questions: 1 mark each. 1) If a firm follows a residual dividend policy, they will give precedence to: a) b) c) d) e) maintaining their desired debt-equity ratio over paying dividends paying a constant dividend over increasing retained earnings paying dividends over accepting positive investments maintaining a constant level of debt before paying dividends avoiding dividend cuts over changing the debt-equity ratio 2) An investment project is most likely to be accepted by the payback period rule and not accepted by the NPV rule if the project has a) b) c) d) e) a large initial investment with moderate positive cash flows over a very long period of time. a very large negative cash flow at the termination of the project. most of the cash flows at the beginning of the project. all projects approved by the payback period rule will be accepted by the...
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...Week 7 Quiz, ACC 401 Week 7 Quiz – Strayer Chapter 8 Changes in Ownership Interest Multiple Choice 1. When the parent company sells a portion of its investment in a subsidiary, the workpaper entry to adjust for the current year’s income sold to noncontrolling stockholders includes a a. debit to Subsidiary Income Sold. b. debit to Equity in Subsidiary Income. c. credit to Equity in Subsidiary Income. d. credit to Subsidiary Income Sold. 2. A parent company may increase its ownership interest in a subsidiary by a. buying additional subsidiary shares from third parties. b. buying additional subsidiary shares from the subsidiary. c. having the subsidiary purchase its shares from third parties. d. all of these. 3. If a portion of an investment is sold, the value of the shares sold is determined by using the: 1. first-in, first-out method. 2. average cost method. 3. specific identification method. a. 1 b. 2 c. 3 d. 1 and 3 4. If a parent company acquires additional shares of its subsidiary’s stock directly from the subsidiary for a price less than their book value: 1. total noncontrolling book value interest increases. 2. the controlling book value interest increases. 3. the controlling book value interest decreases. a. 1 b. 2 c. 3 d. 1 and 3 5. If a subsidiary issues new shares of its stock to noncontrolling stockholders, the book value of the parent’s interest in the subsidiary may a. increase. b. decrease. c. remain the same. d. increase, decrease,...
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...Group project for the Corporate Finance course (Part II) Financial Statements Analysis, Free Cash Flow Estimation, Company Valuation, Description of Dividend Policy and Recently Taken Projects For PAO Gazprom Performed by group №___ MiM, cohort II Group members: Supervisor: assoc. prof. Yulia B. Ilina Financial statements analysis This part of analysis will be conducted using financial ratios, percentage change in the balance sheets and income statements, as well as common size balance sheets and income statements for the years 2010 – 2014. Some values of industry averages were found in the Thomson Reuters Eikon database. Missing values were calculated using financial statements of the key players in the industry (ExxonMobil, Shell, Chevron and BP). Financial ratios Liquidity ratios Let us look at whether Gazprom can meet its short-term obligations using the resources it has at the moment. Current ratio measures the firm’s ability to pay its short-term and long-term obligations Current ratio= Current assestsCurrent liabilities. Fig.1 For Gazprom it equals 2,38, while the industry average is 1,16. This means that Gazprom can cover all its current liabilities with its current assets easily. It is higher than the industry average, which indicates that Gazprom can cover its current liabilities with its current assets easier than an average company from the industry. Gazprom can invest in many projects, however a too high CA might appear not liquid. Current ratio...
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...Strayer Chapter 8 Changes in Ownership Interest Multiple Choice 1. When the parent company sells a portion of its investment in a subsidiary, the workpaper entry to adjust for the current year’s income sold to noncontrolling stockholders includes a a. debit to Subsidiary Income Sold. b. debit to Equity in Subsidiary Income. c. credit to Equity in Subsidiary Income. d. credit to Subsidiary Income Sold. 2. A parent company may increase its ownership interest in a subsidiary by a. buying additional subsidiary shares from third parties. b. buying additional subsidiary shares from the subsidiary. c. having the subsidiary purchase its shares from third parties. d. all of these. 3. If a portion of an investment is sold, the value of the shares sold is determined by using the: 1. first-in, first-out method. 2. average cost method. 3. specific identification method. a. 1 b. 2 c. 3 d. 1 and 3 4. If a parent company acquires additional shares of its subsidiary’s stock directly from the subsidiary for a price less than their book value: 1. total noncontrolling book value interest increases. 2. the controlling book value interest increases. 3. the controlling book value interest decreases. a. 1 b. 2 c. 3 d. 1 and 3 5. If a subsidiary issues new shares of its stock to noncontrolling stockholders, the book value of the parent’s interest in the subsidiary may a. increase. b. decrease. c. remain the...
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...amount of inventory level. s=Minimum inventory level that does not required new order.(if inventory level strictly below of s , company gives order and complete their inventory level to S at the beginning of new week.) Xt <s company buys Ot=S-Xt Order of company(Ot) = Xt≥s company buys nothing. t=0,1……n CASE A In this case, company sell mobile phones with backordering strategy. i) State= the inventory level at the end of week t. S={(s-m),……………,S } At the beginning of the week the lowest inventory level can be s, so that the minimum inventory level can be s-m which m is the maximum number of demand. ii) Xt <s Xt+1=S-Dt+1 Xt≥s Xt+1= Xt -Dt+1 iii) Xt=i Xt+1=j So; i<s j=S-Dt+1 Dt+1=S-j i≥s j= i -Dt+1 Dt+1=i-j Due to the reason that the demand function is distributed with poisson distribution. We use the probability function of Poisson which is; P(X=a)= λa*eλ/a! Therefore, we use adjust this equation according to our demand function. P(Dt+1=S-j)= λ(S-j) *e-λ ÷ (S-j)! P(Dt+1=i-j)= λ(i-j) *e-λ ÷ (i-j)! Let X0=4, λ=2,m=6, s=2 and S=5 iv) According to the probability functions that are stated above we calculated the probabilities of state transitions and inserted these values in to the matrix cells which is given below. Table 1. case a first probability matrix. The we realized that sum of the...
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...The future value of an investment will increase when | | |the number of years increases. | | | |the interest rate increases. | | | |both a and b. | | | |none of above. | Question 2 When the compounding frequency increases (interest is paid more often), the future value of the investment will | | |increase. | | | |decrease. | | | |show no change. | | | |increase or decrease. | When calculating NPV for two projects of differing risk, a financial manager should | | |use the company’s overall discount rate for both of the projects. | | | |adjust the overall discount rate higher for the riskier project. | | | |adjust the overall discount rate lower for the riskier project. ...
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...is the allocation of the expense for natural resources. Amortization is used for the expenses of intangible assets that a company may use. All three need to calculate the useful life of the items being expensed. They also need to have a life span. There are differences between all three, such as depreciation is used for physical assets like buildings, land, and machinery. Depletion on the other hand is used for natural resources such as timber, underground deposit such as oil, and gas. Finally, amortization is for intangible assets like patents, trademarks and goodwill. When calculating depreciation three factors must be determined; cost, salvage value, and useful life. To calculate the depreciable value of the asset one would use the cost less salvage value divided by the useful life of the asset. This would equal the annual depreciation rate of the asset. The straight-line method of depreciation remains the same until the useful life of the asset is used and is the most commonly used method. Calculating depletion requires cost less salvage value divided by estimated units multiplied by number of units extracted and sold. This would equal the annual depletion expense for the asset and is using the units-of-activity method. Last, amortization is calculated similar to depreciation in that the cost of the asset divided by its useful life would equal the annual amortization expense; however, this only pertains to intangible assets with a limited useful life. Intangible assets...
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...know the following about male and female salaries. a. Male and female overall average salaries are not equal in the population. b. Male and female overall average compas are equal in the population, but males are a bit more spread out. c. The male and female salary range are almost the same, as is their age and service. d. Average performance ratings per gender are equal. Let's look at some other factors that might influence pay - education(degree) and performance ratings. 1 Last week, we found that average performance ratings do not differ between males and females in the population. Now we need to see if they differ among the grades. Is the average performace rating the same for all grades? (Assume variances are equal across the grades for this ANOVA.) You can use these columns to place grade Perf Ratings if desired. A B C D E F Null Hypothesis: Alt. Hypothesis: Place B17 in Outcome range box. Interpretation: What is the p-value: Is P-value < 0.05? Do we REJ or Not reject the null? If the null hypothesis was rejected, what is the effect size value (eta squared): Meaning of effect size measure: What does that decision mean in terms of our equal pay question: 2 While it appears that average salaries per each grade differ, we need to test this assumption. Is the average salary the same for each of the grade levels? (Assume equal variance, and use the analysis toolpak function ANOVA.) Use the input table to the right to list salaries...
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...know the following about male and female salaries. a. Male and female overall average salaries are not equal in the population. b. Male and female overall average compas are equal in the population, but males are a bit more spread out. c. The male and female salary range are almost the same, as is their age and service. d. Average performance ratings per gender are equal. Let's look at some other factors that might influence pay - education(degree) and performance ratings. 1 Last week, we found that average performance ratings do not differ between males and females in the population. Now we need to see if they differ among the grades. Is the average performace rating the same for all grades? (Assume variances are equal across the grades for this ANOVA.) You can use these columns to place grade Perf Ratings if desired. A B C D E F Null Hypothesis: Alt. Hypothesis: Place B17 in Outcome range box. Interpretation: What is the p-value: Is P-value < 0.05? Do we REJ or Not reject the null? If the null hypothesis was rejected, what is the effect size value (eta squared): Meaning of effect size measure: What does that decision mean in terms of our equal pay question: 2 While it appears that average salaries per each grade differ, we need to test this assumption. Is the average salary the same for each of the grade levels? (Assume equal variance, and use the analysis toolpak function ANOVA.) Use the input table to the right to list salaries...
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... Group 7 Has Kelly Services Inc. underperformed or outperformed its competitors? On what dimensions? Financial ratios are great indicators to find a firm’s performance and financial situation. Most of the ratios are able to be calculated through the use of financial statements provided by the firm itself. They show the relationship between two or more financial variables that can be used to analyze trends and to compare the firm’s financials with other companies to further come up with market values or discount rates, etc. After coming up with all of the financial ratios the financial statements are able to provide, management can figure out the trend analysis, cross-sectional analysis and industry comparables analysis. Profitability ratios show how profitable and efficiently the company generates profits on its sales. They also indicate how efficiently a company controls its expenses, as well as how efficiently a company uses its assets in producing sales. Looking at the financial statements in Exhibit 4, we were able to provide a concise analysis of the profitability ratios of Kelly Services Inc. while comparing them to the profitability ratios of Olsten. |Kelly Services Inc. | | |Olsten | | | | | | | ...
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