There are basically two methodologies for project and firm valuations: the Weighted Average Cost of Capital WACC (and derived methods) and Adjusted Present Value (APV)1. For practical purposes, as is often the case of many larger firms in industrialized economies, whenever a target debt ratio is set up for the long term, WACC and its associated methods might be an acceptable approximation. However, the situation is different in a considerable number of instances: The weighted average cost
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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
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Long Range Planning 43 (2010) 308e325 http://www.elsevier.com/locate/lrp Building Social Business Models: Lessons from the Grameen Experience Muhammad Yunus, Bertrand Moingeon and Laurence Lehmann-Ortega Grameen bank, founded in 1976, has both pioneered the development of micro-finance, and created nearly 30 businesses designed to alleviate poverty. The article traces the gradual development of Grameen’s expertise in formulating social business models, which require new value propositions, value
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CHAPTER 17 Does Debt Policy Matter? Answers to Practice Questions 1. a. The two firms have equal value; let V represent the total value of the firm. Rosencrantz could buy one percent of Company B’s equity and borrow an amount equal to: 0.01 × (DA - DB) = 0.002V This investment requires a net cash outlay of (0.007V) and provides a net cash return of: (0.01 × Profits) – (0.003 × rf × V) where rf is the risk-free rate of interest on debt. Thus, the two investments are identical.
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rate of dividends. If g increases, stock prices would tend to increase. The net result will be an ambiguous e¤ ect on stock prices. SHORT ANSWERS NO CREDIT WILL BE GIVEN FOR JUST STATING THE CORRECT ANSWER. 1. Suppose you observe that after a …rm makes an unanticipated earnings announcement, there is an immediate jump in the stock price and then the price keeps drifting for a while after the announcement. Is this consistent with the e¢ cient markets hypothesis? Explain. No it is not. If there
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ASSIGNMENT – BMMF5103 OUM BUSINESS SCHOOL SEPTEMBER 2014 BMMF5103 MANAGERIAL FINANCE MATRICULATION NO IDENTITY CARD NO. TELEPHONE NO. E-MAIL LEARNING CENTRE : : : : : CGS00965001 830825-14-5638 019-2289044 nuraishah.baharudin@gmail.com Kuala Lumpur Learning Centre ASSIGNMENT – BMMF5103 TABLE OF CONTENT Introduction to the companies’ background…………………………………………………….….2 Calculation of relevant financial ratios of both companies……..………………………………….4 Analysis
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CHAPTER 13 RISK, RETURN, AND THE SECURITY MARKET LINE Answers to Concepts Review and Critical Thinking Questions 1. Some of the risk in holding any asset is unique to the asset in question. By investing in a variety of assets, this unique portion of the total risk can be eliminated at little cost. On the other hand, there are some risks that affect all investments. This portion of the total risk of an asset cannot be costlessly eliminated. In other words, systematic risk can be controlled
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Answers – Chapter 6 (part 1) Question 1 a) Offer - The term ‘offer’ (or proposal) is explained in section 2 (a) of the Contracts Act 1950 as ‘when one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal’. - An offer may be expressed or implied. - The communication of an offer is complete when it comes to the knowledge of the person
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mentioned in the case study, Usop decided to sell his car by parking it outside with a notice stating “ For Sale. One Owner. Best Price RM 8 750. Please call at number 34 Jln Semarak 2, Kuala Lumpur or telephone 03-8251178.” In this case, first and foremost we need to identify this is an invitation to treat or an offer or proposal. An offer should be contrasted with an option and an advertisement. According to Section 2(a), Usop has made an offer or proposal to sell his car with a price RM 8 750 and he
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The two principal shareholders and controlling directors were Encik Zayed and Puan Hashimah which are husband and wife. Since 2006, the company has been awarded with several engineering project. In May 2006, the company had secured a contrct worth RM 750,000 to be implemented over a duration of 6 months. Due to shortage of funds, the company has submitted applications to Maybank and CIMB for banking facilities. The banks required the company’s Audited Financial Statements for the last two years
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