Project Financing Melissa Austin PJM 535 – Project Metrics, Monitoring, and Control Colorado State University – Global Campus Dr. Scott Burch August 23, 2015 Project Financing Project financing is a loan by a lender in which the debt gets paid back from the cash flow the project generates (Investopedia, 2015). With project financing of course risks are involved. The risks can fall into five different sections: financial, development, political, organizational, and execution (Kerzner, 2013)
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1: Tests of Profitability Return on Equity | 2012 | Under Armour | 15.8% | Nike, Inc. | 21.4% | The return on assets ratio measures how effectively a company can earn a return on its investment in assets. In other words, ROA shows how efficiently a company can covert the money used to purchase assets into net income or profits. Based on Nike, Inc.’s ROE of 21.4%, it can be concluded that Nike, Inc. could be more efficient in utilizing its equity base and may have a better return to investors
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Aswath Damodaran 2 Equity Valuation versus Firm Valuation n n Value just the equity stake in the business Value the entire business, which includes, besides equity, the other claimholders in the firm Aswath Damodaran 3 I.Equity Valuation n The value of equity is obtained by discounting expected cashflows to equity, i.e., the residual cashflows after meeting all expenses, tax obligations and interest and principal payments, at the cost of equity, i.e., the rate of return
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Annual Report 2010 On June 16, 2011, IBM marks its centennial. As we reflect on our first century, it has sparked new thinking about the possibilities for our second. Join us at IBM100.com A Letter from the Chairman 1 Dear IBM Investor: I am pleased to report that IBM had another strong year in 2010. Your company continued to outperform our industry and the market at large. We once again achieved record pre-tax earnings, record earnings per share, record free cash flow and improved profit margins
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invest the excess of their monthly salary or to even adjust the composition of their net worth. Those who go through indirect financing usually prefer to go though financial intermediaries to watch their money grow while direct financing allow them to purchase securities and bonds directly. Q2. Differentiate between the following types of markets: -Physical asset markets versus financial asset markets Assets are commonly known as anything with a value that represent economic resources or ownership
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Capital (WACC) formula, a shown below. WACC: (%debt)* (pretax cost of debt capital)*(1-marginal effective tax rate) + (%equity)*(cost of equity capital) In order to calculate Boeing’s debt percentage, it is assumed in this analysis that the capital structure remains the same and is unaffected by the current potential 7E7 project. The debt/equity ratio is .525, as listed in Exhibit 10 of the case. To calculate the total market value of debt, the market value of all of the bonds listed in Exhibit
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generally thought of as the process of buying an item in one market and simultaneously selling it at a higher price in another market and thus earning a riskless profit. MM broadened this concept. They show, under a set of assumptions, that personal debt can be used to cause the risk of two different stocks to be the same but the returns on the stocks can be different. Then, one could buy the cheaper stock and simultaneously sell the more expensive one and end up earning a riskless profit. Using
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the lessee. Many leasing problems are cast from the standpoint of the lessee only, and thus, amount to estimating the cost of financing. By considering both perspectives, this case shows that the lessee’s financing problem is the lessor’s investment problem. The other key insight provided by this perspective is that competition among manufacturers to provide lease financing actually replicates competition in the capital markets. Constrained by the risk-adjusted costs of capital and the pressures of
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of capital structure, what are the main pros and cons associated with debt financing? Based on this, when would you recommend that a firm take on a large amount of leverage? (In other words, what kind of firm characteristics are more conducive to high leverage?) When would you recommend low leverage? The main pros of debt financing are Tax shield – debt payments are a tax deductible expense The main disadvantage of debt is that it is risky. There is a risk of bankruptcy and bankruptcy can
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toward its distributors in Ukraine? Why is it different from the policy toward its other distributors? Is the company’s credit policy appropriate? Is it profitable? If not, how to change it? 3. Why does this firm need increasing amounts of bank debt? 4. As a member of BoD, how would you vote on: o The proposed raise for Oleg Pinchuk o The quarterly dividend declaration of €698,000. o Adoption of the financial plan for 2001? Spreadsheet file: Available Donaldson, Lufkin & Jenrette 1995
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