operating as a generalist firm that provides expansionary or transitional funds to companies in order to let them grow and eventually go public. Palamon takes extensive measures to screen prospective companies for the desired characteristics necessary for an investment. After careful consideration, Palamon has the opportunity to invest €25.9MM in Team Systems, an Italian accounting, tax, and payroll software company, in exchange for a 51% stake in the firm. Palamon saw recognized that there were
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Acquisition Valuation Aswath Damodaran Aswath Damodaran 1 Issues in Acquisition Valuation I Acquisition valuations are complex, because the valuation often involved issues like synergy and control, which go beyond just valuing a target firm. It is important on the right sequence, including • When should you consider synergy? • Where does the method of payment enter the process. I I Can synergy be valued, and if so, how? What is the value of control? How can you estimate the value
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use? Why? c. What Beta did you use and how did you derive it? d. Which risk-free rate did you use? Why? e. Which capital-structure weights did you use? Why? 2. Judged against your WACC, how attractive is the Boeing 7E7 project? a. Under what circumstances is the project economically attractive? b. What does sensitivity analysis (your own and/or that shown in the case) reveal about the nature of Boeing’s gamble on the 7E7? 3. Should the board approve the 7E7? Management Summary The analysis
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greatly appreciate comments and suggestions by Malcolm Baker, Andor Gy¨rgy, Owen Lamont, o Masahiro Watanabe, Jeff Wurgler and seminar participants at the NBER Behavioral Finance Spring Meeting, the University of Mannheim, the 2011 European Financial Management Association meetings, the 2011 European Finance Association meetings, the CEPR European Summer Symposium on Financial Markets and HEC Lausanne. Boris Vall´e provided excellent research assistance. Thesmar e thanks the HEC Foundation for financial
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The company I am analyzing is the Home Shopping Network, Inc. The trade symbol on Nasdaq is HSNI. They are a $3.4 billion distributor in the retail industry sector. They are different in their distribution of goods to the consumer, in an efficient innovative manner. HSNI has several operating risk, according to an article by HSNI, “; risks associated with possible systems failures and/or security breaches, including any breach that results in the theft, transfer or unauthorized access or
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Financial Analysis Spring 2014 William Wrigley Jr. Company: Efficiently Financed or Financially Conservative? Introduction Blanka Dobrynin, a managing partner of Aurora Borealis LLC, is considering a potential investment in William Wrigley Jr. Company. Aurora Borealis LLC typically focuses on distressed companies that are in need of restructuring. Ms. Dobrynin believes that if Wrigley were to take on debt, it could create significant new value for the company. Ms. Dobrynin and her associate, Ms. Susan Chandler
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the CAPM 3. The risk-free rate is 5% and the expected return on the market portfolio is 13%. A stock has a beta of 1.5, what is its expected return? a. 17% b. 12% c. 19.5% d. 24.5% ANS: A E(R) = 5% + 1.5(13%-5%) = 17% DIF: E REF: 7.3 The Security Market Line and the CAPM 4. The risk-free rate is 5% and the expected return on the market portfolio is 13%. A stock has a beta of 1.0, what is its
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M.I.T. Sloan School of Management Spring 1999 15.415 First Half Summary Present Values • Basic Idea: We should discount future cash flows. The appropriate discount rate is the opportunity cost of capital. • Net Present Value: The net present value of a stream of yearly cash flows is N P V = C0 + C1 C2 Cn + + ··· + , 2 1 + r1 (1 + r2 ) (1 + rn )n where rn is the n year discount rate. • Monthly Rate: The monthly rate, x, is x = (1 + EAR) 12 − 1, where EAR is the effective annual rate. The EAR
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Mavis Lei JetBlue Airways IPO Valuation Introduction and Recommendation In July 1999, David Neeleman had announced his plan to launch a new airline company that would bring “ humanity back to air travel” despite the fact that U.S. airline industry had lot failures over the past 20 years. JetBlue had target its strategy and operating philosophy by offering customers low –fares tickets, high performance of customer service, providing new aircrafts and focused on point-to-point service to large
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Choice of a product where a shortage exists: Limiting Factor This refers to the situation where a company produces several products, but there is a shortage or single binding constraint. Such a constraint prohibits further profits being made, and may be, for example, sales, availability of skilled labour or availability of materials that may be in short supply. In such circumstances, consideration should be given to maximising the contribution per unit of scarce resource consumed.
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