...use an Excel spreadsheet, place each problem on a separate sheet and label the tab with problem number. Save your document with a descriptive file name, including the assignment and your name. | Chapter 4: * North-South Airline Case Study: In January 2008, Northern Airlines merged with Southeast Airlines . . . 3-1 Data collected on the yearly demand for 50-pound bags of fertilizer at Wallace Garden Supply are shown in the following table. Year Demand for fertilizer (1,000s of bags) 1 4 2 6 3 4 4 5 5 10 6 9 7 10 8 11 9 15 10 16 11 18 a. Develop a 3-year moving average to forecast sales. b. Then estimate demand again with a weighted moving average in which sales in the most recent year are given a weight of 3 and a weight of 2 for the second past year and sales in the other 2 years are each given a weight of 1. c. Which method do you think is best? In this case, the 3 year moving average is the better method as the Mean Absolute Deviation (MAD) is only 3.042 as compared to 3.347 for the weighted moving average method. What it actually means is that each forecast missed the actual value by 3.042 units instead of 3.347 units. d. Develop a trend line for the demand for fertilizer using any computer software. e. You have now developed three different forecasts. These are a 3-year moving average, a weighted moving average, and a trend line. Which one would you use? Explain your answer...
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...Easton University of Notre Dame Mary Lea McAnally Texas A&M University Gregory A. Sommers Southern Methodist University Xiao-Jun Zhang University of California, Berkeley Cambridge Business Publishers To my daughters, Joanne and Stacey —PDE To my husband Brittan, and my children Loic, Maclean, Quinn and Kay —MLM To my wife Susan, and my children Christian, Peter and Philip —GAS To my wife Sharon, my daughter Jasmine, and my parents 滕惠清 and 张祥林 —XZ Financial Statement Analysis & Valuation, Fourth Edition, by Peter D. Easton, Mary Lea McAnally, Gregory A. Sommers, and Xiao-Jun Zhang. COPYRIGHT © 2015 by Cambridge Business Publishers, LLC. Published by Cambridge Business Publishers, LLC. Exclusive rights by Cambridge Business Publishers, LLC for manufacture and export. ALL RIGHTS RESERVED. No part of this publication may be reproduced, distributed, or stored in a database or retrieval system in any form or by any means, without prior written consent of Cambridge Business Publishers, LLC, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Student Edition ISBN 978-1-61853-104-9 Bookstores & Faculty: to order this book, call 800-619-6473 or email customerservice@cambridgepub.com. Students: to order this book, please visit the book’s Website and order directly online. Printed in the United States of America. 10 9 8 7 6 5 4 3 2 1 About the Authors ...
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...Chapter 1 An Introduction to Tax SOLUTIONS MANUAL Discussion Questions: 1) [LO1] Jessica’s friend Zachary once stated that he couldn’t understand why someone would take a tax course. Why is this a rather naïve view? Taxes are a part of everyday life and have a financial effect on many of the major personal decisions that individuals face (e.g., investment decisions, evaluating alternative job offers, saving for education expenses, gift or estate planning, etc.). 2) [LO1] What are some aspects of business that require knowledge of taxation? What are some aspects of personal finance that require knowledge of taxation? Taxes play an important role in fundamental business decisions such as the following: • What organizational form should a business use? • Where should the business locate? • How should business acquisitions be structured? • How should the business compensate employees? • What is the appropriate mix of debt and equity for the business? • Should the business rent or own its equipment and property? • How should the business distribute profits to its owners? One must consider all transaction costs (including taxes) to evaluate the merits of a transaction. Common personal financial decisions that taxes influence include: choosing investments, retirement planning, choosing to rent or buy a home, evaluating alternative job offers, saving for education...
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...Chapter 01 An Introduction to Tax SOLUTIONS MANUAL Discussion Questions (1) [LO1] Jessica’s friend Zachary once stated that he couldn’t understand why someone would take a tax course. Why is this a rather naïve view? Taxes are a part of everyday life and have a financial effect on many of the major personal decisions that individuals face (e.g., investment decisions, evaluating alternative job offers, saving for education expenses, gift or estate planning, etc.). (2) [LO1] What are some aspects of business that require knowledge of taxation? What are some aspects of personal finance that require knowledge of taxation? Taxes play an important role in fundamental business decisions such as the following: * What organizational form should a business use? * Where should the business locate? * How should business acquisitions be structured? * How should the business compensate employees? * What is the appropriate mix of debt and equity for the business? * Should the business rent or own its equipment and property? * How should the business distribute profits to its owners? One must consider all transaction costs (including taxes) to evaluate the merits of a transaction. Common personal financial decisions that taxes influence include: choosing investments, retirement planning, choosing to rent or buy a home, evaluating alternative job offers, saving for education expenses, and doing gift or estate planning. ...
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...Industry and Economic Trends Analysis 6 3. SWOT Analysis 7 4. Valuation 11 4.1. Weighted Average Cost of Capital 11 4.1.1. Re: Cost of Equity 12 4.1.2. Rd * (1-Tc): Cost of Debt 14 4.2. Pro Forma Forecasting 16 4.3. Discounted Cash Flow Valuation 19 4.4 Earning Valuation 21 4.5 Relative P/E Ratio Model 23 4.6 Synergy 26 5. Outcome and process of negotiations 28 6. References 30 7. Appendices 31 Executive Summary The purpose of this paper is to evaluate and negotiate an acquisition of Jos. A Bank by Men’s Wearhouse. The first step of this process is to use fundamental analysis to value the equity per share value of Jos. A Bank. The second step is to value the synergy between Men’s Wearhouse and Jos. A Bank to estimate the value that would be added to Men’s Wearhouse if they were to acquire Jos. A Bank. Lastly, the paper will address the process of the negotiation with Jos. A Bank management for the proposed acquisition and the ultimate outcome of the process. The North American Industry Classification System (NAICS) classifies Men’s Wearhouse as a clothing and clothing accessories store and this subsector of the retail industry has approximately 2.5 million employees. The firm was founded by George Zimmer in 1973 in Houston, Texas. Since then the company has grown to 900 stores nationally and continues to expand on internet retail as well. As part of this aggressive expansion strategy, CEO Doug Ewert is exploring the opportunity of buying...
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...Pepsi – An Introduction Introduction PepsiCo, Inc., major producer of carbonated soft drinks, other beverages, and snack foods. Its beverage division, Pepsi-Cola Company, bottles and markets several popular brands of soft drinks in the United States and throughout the world. PepsiCo also owns Frito-Lay Company, the leading snack-food maker in the United States. PepsiCo is based in Purchase, New York. PepsiCo’s soft drink products include Pepsi, Diet Pepsi, and Mountain Dew. Other beverages include Lipton Brisk and Lipton’s Brew iced teas, All Sport athletic drink, and Aquafina bottled water. Frito-Lay products include Lay’s and Ruffles Potato Chips, Fritos and Doritos Corn Chips, Chee-tos Cheese Snacks, Tostitos Tortilla Chips, Rold Gold Pretzels, and Grandma’s Cookies. Early History PepsiCo traces its origins to 1898 when Caleb Bradham, a pharmacist in New Bern, North Carolina, created a curative drink for dyspepsia called Pepsi-Cola. Pepsi-Cola, later referred to simply as Pepsi, was a mixture of carbonated water, cane-sugar syrup, and an extract from tropical kola nuts. To sell his product, Bradham formed the Pepsi-Cola Company in 1903. In addition to selling the drink at drugstore counters, Bradham bottled Pepsi for sale on store shelves. At this time, bottling was a new innovation in food packaging. However, due to major increases in the price of sugar, Bradham began to lose money on Pepsi, and in 1923 he filed for bankruptcy. The Craven Holding Company of Craven County...
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...Crafting & Executing Strategy the Quest for Competitive Advantage The Amazon Company Table of Contents * Introduction……………………………………………P.3 * Background Information………………………………P.3 * Senior Management……………………………………P.8 * Competitors……………………………………………P.8 * Marketing Strategy……………………………………P.9 * Problems and Issues confronting the Company………P.10 * Recommendation……………………………………..P.10 * SWOT Analysis……………………………………….P.10 * Financial Ratios and Analysis………………………..P.11 Introduction Surviving the dot com boom was a significant accomplishment for Amazon, which helped them claim the title of being the one stop shopping retailer for all. Amazon was introduced to the public in 1995 from Seattle Washington. Some people may remember Amazon as an online bookstore. Over the years, they evolved into the most popular internet retailer in the world and Amazon quickly became the growing trend among consumers, because they are convenient, have a speedy service, low prices and quality. Using third party sources, Amazon has diversified their portfolios and continues to offer consumers new products (LexisNexis, Academic). Reinventing their strategy to adapt to consumers’ growing needs and the source of must have items; Amazon will continue to survive the world of internet retail. Background Information Amazon is the pioneer of online retailing. It started out as an online bookstore, offering a limited amount of selections. They expanded...
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...in a database or retrieval system in any form or by any means, without prior written consent of Cambridge Business Publishers, LLC, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Student Edition ISBN 978-1-61853-102-5 Bookstores & Faculty: to order this book, call 800-619-6473 or email customerservice@cambridgepub.com. Students: to order this book, please visit the book’s website and order directly online. Printed in the United States of America. 10 9 8 7 6 5 4 3 2 1 About the Authors Peter D. Easton is an expert in accounting and valuation and holds the Notre Dame Alumni Chair in Accountancy in the Mendoza College of Business. P rofessor Easton’s expertise is widely recognized by the academic research community and by the legal community. Professor Easton frequently serves as a consultant on accounting and valuation issues in federal and state courts....
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...own-source revenues; transfers from other levels of government; and types of self-financing including user charges, special assessments, impact fees, and a variety of other measures to collect fees or revenues sufficient to support the specific project or facility. Expenditure analysts look at the present and potential future commitments of jurisdictions. Population growth, changing economic conditions, the state of the current capital facilities and infrastructure base, and the socioeconomic characteristics of the population are important influences on potential future expenditures. Fiscal capacity analysis, focusing on the ability to generate revenues, and on expenditure needs, is used to determine present fiscal conditions and estimate future conditions” (P. 555). Discuss how the debt capacity of a governmental entity is determined: “Within the FY2015 budget document are defined explanations of any changes from FY2014. Equally important as the aforesaid statement are the estimated revenues derived from taxes and various other sources, which is inclusive of the current tax rate structure and the valuation of properties for FY2015. Additionally, an itemization of proposed expenses by all municipal agencies is juxtaposed to previous FY actual expenses and current year-to-date (YTD) expenses. Further, there is an account of all outstanding debt service, as well as any capital expenditures that will...
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...Table of Contents Written Report Executive Summary…….............................................................................. 2 Company Profile………………………………………………………..…..3 Industry Analysis…………………………………………………………...4 SWOT Analysis………………………………………………………….....8 Valuation…………………………………………………………………..12 Conclusion……………………………………………………………..…..13 Historical Ratio Analysis Valuation ratios………………………………………………………........17 Dividends………………………………………………………………….17 Growth rates……………………………………………………………….18 Financial strength………………………………………………………….18 Profitability ratios………………………………………………………….19 Management effectiveness…………………………………………….......19 Efficiency………………………………………………………………….19 Valuation Tables Pro Forma Income Statement……………………………………………..21 Pro Forma Balance Sheet…………………………………………………23 Free Cash Flow……………………………………………….…………...25 Free cash flow valuation summary……………………………..……...….26 WACC calculation………………………………………………………...27 Sensitivity analysis………………………………………………………...27 Graphs/ Plots Net income (loss) by year……………………………………………….…28 Free cash flow by year……………………………………………………..28 Written Report Executive Summary Executive Summary Introduction of the Firm Under Armour (UA) was incorporated on July 1, 1996; producing and distributing performance apparel and footwear for athletes of all ages. The brand engineered a fabric that enhances performance and comfort through its “moisture wicking” fabrications that helps athlete’s performance no matter the weather...
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...quality at the right time. Such planning and coordination, however, is often very complex. For example, a typical manufacturer is required to track hundreds or thousands of raw materials, components, and subassemblies for effective production. In a similar way, a service provider must ensure the appropriate employees and range of necessary materials are available to fill the needs of multiple market segments, often on very short notice. Effective internal planning and control represents the fundamental “block and tackling” underlying an organization’s efficient and effective operations. Operations planning and control is the second of the foundational blocks that contribute to the management of broader operational systems (see Figure 3.1). Forecasting customer demand based on a wide range of business factors is one critical input. Planning for operations then must cover both the long-term planning horizon for overall capacity and process-related resources, such as facilities, equipment, and personnel, as well as detailed schedules to match these to customer needs. And once plans are in place, management must actively control the use of resources to meet customer demands and against budgets. In practice, planning and control is a multistage process, often with iteration to refine the development or acquisition of particular resources (see Figure 3.2) (Vollmann, Berry, & Whybark, 1992). Although long-term forecasts and plans can...
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...CHAPTER ONE INTRODUCTION 1.0 PREAMBLE One constant variable that permeates through man’s entire life is uncertainty. Uncertainty and man are inseparable. As man builds organizations and institutions that he utilizes to make his existence easier, uncertainties also creep into these organizations and institutions. All human transactions carry these uncertainty traits. These transactions are many and varied but arise essentially, as stated above, as inherently of man and the institution created by him. One of the ways man has tried to manage and control the damaging effects of uncertainty in his institution especially as it relates to his financial transaction in use of budget. These are many varied definitions of budget, according to Obazele (2000:127)in his book titled Accounting for public sector Activities in Nigeria. Budget is defined as a “statement whish express future plans in financial terms.” It is also defined by Okoye (1979: 301). In his book titled Cost Accounting Management Operational Application, as “plans prepared and approved before The of use. A budget is defined in the institution of cost and management Accounting, 1966 edited of Terminology as a financial and/or quantitative statement prepared and approved prior to a defined period of the policy to be pursued during that period for the purpose of attaining a given objective”. Going by the above definitions of budget by previous authors, it could be deduced that a budget as an element of control in it...
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...The University of Chicago Red Ink in the Rearview Mirror: Local Fiscal Conditions and the Issuance of Traffic Tickets Author(s): Thomas A. Garrett and Gary A. Wagner Source: Journal of Law and Economics, Vol. 52, No. 1 (February 2009), pp. 71-90 Published by: The University of Chicago Press Stable URL: http://www.jstor.org/stable/10.1086/589702 . Accessed: 12/03/2011 22:11 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at . http://www.jstor.org/action/showPublisher?publisherCode=ucpress. . Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. ...
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...A Meta-Analysis of the Economic Impacts of Climate Change Policy in the United States Adam Rose* and Noah Dormady** This paper provides a meta-analysis of a broad set of recent studies of the economic impacts of climate change mitigation policies. It evaluates the infiuences of the impacts of causal factors, key economic assumptions and macroeconomic linkages on the outcome of these studies. A quantité regression analysis is also performed on the meta sample, to evaluate the robustness of those key factors throughout the full range of macro findings. Results of these analyses suggest that study results are strongly driven by data inputs, economic assumptions and modeling approaches. However, they are sometimes affected in counterintuitive ways. 1. INTRODUCTION The macroeconomic impacts of climate change mitigation policies are controversial among both scholars and the policy-making community. Results range from predictions of severe economic harm to significant overall economic gains. Given the unresolved nature of this debate, this paper seeks to shed light on it by evaluating a wide range of macroeconomic studies through a metaanalytic approach. Meta-analysis is a method for evaluating a cross-section of studies on a given topic, and evaluating the impacts of assumptions, input variables and modeling approaches on the overall findings of the studies. In essence, meta-analysis is a study of studies (Borenstein et al., 2009; Lipsey and Wilson 2001). The Energy...
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...Off-balance-sheet activities, earnings persistence and stock prices: Evidence from operating leases* Weili Ge University of Washington Business School University of Washington Mackenzie Hall, Box 353200 Seattle, WA 98195 (206) 221-4835 geweili@u.washington.edu November 22, 2006 Abstract This paper examines the implications of the off-balance-sheet treatment of operating leases for future earnings and stock returns. The property rights granted by an operating lease contract generate both future benefits (off-balance-sheet capital investment) and future obligations (offbalance-sheet financing liabilities) for the lessee. The change in the off-balance-sheet capital investment can be viewed as a form of growth in net operating assets and also a form of offbalance-sheet accruals. By examining the footnote disclosure on operating leases, this paper shows that, after controlling for current earnings, greater off-balance-sheet operating lease activities lead to lower future earnings. This finding is consistent with diminishing marginal returns to investment in operating lease activities. Additional tests show that investors seem to incorrectly estimate the implications of off-balance-sheet lease activities for future earnings. A long-short investment strategy that exploits this misestimation generates significant future abnormal stock returns. These results suggest that the accrual anomaly documented in prior research extends to off-balance-sheet lease accruals. * This paper...
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