| Alternative 1 (Debt) | Alternative 2 (Equity) | Debt ratio | | | Times interest earned | | | Operating profit | 18 million | 18 million | Interest expense | 6.3 million | 4.8 million | Earnings before tax | 11.7 million | 13.2 million | Income tax expenses (40%) | 4,680,000 | 5,280,000 | Net earnings | 7,020,000 | 7,920,000 | Earnings per share | $8.78 for 800,000 shares | $7.92 for 1,000,000 shares | Return on Equity | = 0.1404 or 14.04%
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recommended are the Asquith and Mullins article on equity signaling, and articles by Stern Stewart on financial communication. 1. In theory, to fund an increased dividend payout or a stock buyback, a firm might invest less, borrow more, or issue more stock. Which of those three elements is Gainesboro’s management willing to vary, and which elements remain fixed as a matter of the company’s policy? 2. What happens to Gainesboro’s financing need and unused debt capacity if: a. no dividends are paid? b
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Darden Case Study UVA-F-1017 Case Study Assignment Subject: Cost of capital − cost of equity and cost of debt; beta risk; estimation; capital structure. The task for students is to evaluate the 777 against a financial standard, the investors’ required rate of return. The general objective of this case is to exercise students’ skills in estimating corporate (divisional/project) costs of capital – cost of equity and WACC. Case Questions, Analysis, and Directions: Read and analyze the case, and prepare
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can get, without changing the debt and equity ratio. The internal growth rate model forecast shows that the firm will not raise any external capital. The model gives the maximum growth in sales that can be supported without doing external financing. The industry growth forecast had been estimated at 30% each year. The percentage of sales method can also be used being that all other expenses in the income statement should grow at the rate of sales. If the debt equity ratio remains constant the firm
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[pic] Walt Disney Company Financial Analysis Managerial Finance BUSA 302 Dr. Frederick Wolf May 24, 2007 Completed By: Shanna Baumgarten Michaela Baylous Laura Buckner Kari Gurtel Table of Contents: • Executive Summary . . . 3 • Background . . . 3 • Financial Statement Analysis . . . 5 o Balance Sheet . . . 5 o Income Statement . . . 8 o Cash Flow Statement . . . 9 • Ratio Analysis . . . 10 o Liquidity . . . 10
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50% almost. That means in 2011 company can fulfill their current liabilities by their current asset. Leverage Ratio. Debt Ratio=Total debtTotal debt+Net worth = TK 3,764,083,810TK 15571750061= 0.24:1 Debt Ratio (2010) = TK 633,616,434TK 633,616,434+TK 8,364,305,505 = 0.07:1 Debt Equity Ratio=Total DebtTotal Equity=TK 3,764,083,810TK 11,807,666,250= 0.32:1 Debt Equity Ratio (2010) =TK 633,616,434TK 8,364,305,505 = 0.08:1 Interest Coverage Ratio=EBITInterest= TK 3,295,087,151TK 407,850
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Stock Index is computed. The WaCC computed can form a new benchmark against which companies can compare their own cost of capital. Usually, companies raise a combination of debt and equity to finance their business. A new company can use this benchmark as a reference to choose the perfect combination of debt and equity to reduce its overall weighted average cost of capital. The methodology computes the cost of capital for the index by including each of the fifty companies of the Nifty index
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companies have a gap between cash they need and cash they generate internally. This gap is financial deficit. So companies have to either sell new equity or borrow.This causes two different kinds of problems: 1) The plow back ratio? => Dividend policy 2) The proportions of debt and issue of equity? => Debt policy. • Net stock issue is negative = Company repurchases more stocks than issues them. Reasons for internally generated
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Online Chapter 15 LEASE FINANCING AND BUSINESS VALUATION Learning Objectives After studying this chapter, readers will be able to describe the two primary types of leases, explain how lease financing affects financial statements and taxes, conduct a basic lease analysis from the perspective of the lessee, discuss the factors that create value in lease transactions, explain in general terms how businesses are valued, and conduct a business valuation using discounted cash flow and market multiple
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COMM 371, Lecture 6 COMM 371, Lecture 6 Lecture 6: Financing Growth – The Clarkson Lumber Case Outline for Today (Clarkson Lumber) • Case objectives • Understand what drives the need for cash: Clarkson needs cash, but has a good record of profitability • Evaluate Clarkson’s loan requirements and ability to repay • Link the short-term financial plan to evaluating the firm’s long-term goals • Practice basic skills in financial analysis • Review facts of case • Construct statement of cash flows
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