EQUITY THEORY Adams' Equity Theory calls for a fair balance to be struck between an employee's inputs (hard work, skill level, tolerance, enthusiasm, and so on) and an employee's outputs (salary, benefits, intangibles such as recognition (and so on). According to the theory, finding this fair balance serves to ensure a strong and productive relationship is achieved with the employee, with the overall result being contented, motivated employees. HISTORY Equity theory proposes that individuals who
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H. J. HEINZ: ESTIMATING THE COST OF CAPITAL IN UNCERTAIN TIMES The report that follows endeavors to determine an appropriate Weighted Average Cost of Capital (WACC) for the H. J. Heinz Company at the end of the 2010 fiscal year. Further, the report attempts to provide reasonable explanations for the decisions and assumptions that were made throughout the required calculations, specifically around the firm’s capital structure, cost of debt and cost of equity. Finally, the report offers an opinion
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investor adjusts the investment account for the amortization of any difference between cost and book value under the a. cost method. b. complete equity method. c. partial equity method. d. complete and partial equity methods. 2. Under the partial equity method, the entry to eliminate subsidiary income and dividends includes a debit to a. Dividend Income. b. Dividends Declared - S Company. c. Equity in Subsidiary Income. d. Retained Earnings - S Company. 3. On the consolidated
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Weighted Average Cost of Capital (WACC). The motive for using WACC to get the discount rate is to attain excellent results. WACC’s utilization is viewed as a more ideal structure when the values attained reflects more than the Current Cost of Investment. The sum total of all the discounted cash flows are referred to as the Value of the firm. Mr. Hawks requested that a valuation be done; hence, the group focused on the DCF model contemplating three assumptions: no debt, debt and equity, and using
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Inc. Cost of Capital 1 Discussion Questions • What is the WACC and why is it important to estimate a firm’s cost of capital? What does it represent? Is the WACC set by investors or by managers? • Do you agree with Joanna Cohen’s WACC calculation? Why or why not? If you do not agree with Cohen’s analysis, calculate your own WACC for Nike and be prepared to justify your assumptions. What mistakes did Joanna Cohen make in her analysis? Which method is best for calculating the cost of equity
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Recapitalization Proposal * Brief history of CPK (p.3) * Reasons for CPK’s success (p.3) * Ways to facilitate the success of CPK (p.3-4) * Anticipated effect of changing the capital structure on return on equity (p.4) * Anticipated effect of changing the capital structure on cost of capital (p.5) * Expected number of shares of CPK that can be repurchased (p.6-7) * Anticipated effect of changing the capital structure on CPK’s stock price (p.6-7) * Our recommendation (p.7) In
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reasons: • The earnings in 1999 for most Japanese firms was depressed relative to earnings earlier in the decade and in the 1980s, reflecting the Japanese economy • Japanese accounting standards tend to understate earnings and overstate book value of equity, as firms are allowed to set aside provisions for unspecified expenses • The earnings of many export oriented Japanese firms tends to be heavily influenced by exchange rate movements • The cross holdings that Japanese firms have in other firms, and
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flow cash) Financial statements: Balance sheet The balance sheet Equity= assets - liabilities current assets current liabilities cash ! inventories ! acc receivable ! equipment ! plant accounts payable ! ! fixed assets long-term liabilities long-term debt ! total shareholders equity stock ! retained earnings ! total assets x total liabilities + equity x Figure 2 example of a balance sheet Financial snapshot: 1 moment in time
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the equity method of accounting for investments Chapter Outline I. Three methods are principally used to account for an investment in equity securities along with a fair value option. A. Fair value method: applied by an investor when only a small percentage of a company’s voting stock is held. 1. Income is recognized when dividends are declared. 2. Portfolios are reported at fair value. If fair values are unavailable, investment is reported at cost. A. Consolidation: when
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stated period of time. This document will compare and contrast the capital asset pricing model (CAPM) and discounted cash flow method (DCF). The debt and equity mix are intended to enable an organization to capitalize on investments. The debt and equity mix will be reviewed as will the characteristics of the financial market and debt and equity instruments. Long-term finance options will be analyzed. Valuation Models The Discounted Cash Flows Model (DCFM) and the Capital Asset Pricing Model (CAPM)
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