on them. From these four different “hurdles” will be used to evaluate if the capital expenditure proposal for Merseyside Works should go ahead. These being: * Impact on earnings per share * Payback Period * NPV of the project (Discounted Cash Flow method) * Internal Rate of Return Background Victoria Chemicals is a major competitor in the world wide chemical industry and a leader in producing polypropylene. Victoria Chemicals was under pressure from investors to improve
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given by the discounted cash flow resulting from the operation of the asset (Damadoran, 2012). It is given the information about the firm asset valuation method. The skiing company generates cash flow, since the skiing equipment rent by the customers. The company asset value is depending on the future cash flows generated by the equipment rental. So we use discount cash flow to calculate the asset and firm value. First step is calculating the expected present value of future cash flow at time 2005
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Pro forma analysis cash flow forecasting Apartment Investment Case Study Scenario An investor is considering buying an apartment building with 140 units offered for sale at $16,500,000. The subject apartment building has the following unit mix: Additionally, the following assumptions are also being made by the investor in order to construct a 5-year cash flow pro forma: Vacancy and Credit Loss In the current market, vacancy and credit losses are running at 9%. Due to the improving market conditions
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Lecture 1 Capital Market and Long Term Finance * Capital Formation (Raise capital to increase their assets and fund working capital) * Markets * Common Stock (long-term security) * Bonds (long-term security) * Derivatives (long-term security) Financial Markets * Exchanges * Specialists (NYSE has SPECIALISTS maintain an orderly market in a stock at a trading station) * Intermediary Firms (NASDAQ has INTERMEDIARY FIRMS maintain a market for a given share * Publicly
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industry. This metric is preferred over P/E ratio since it is not affected by mix of capital structure. It is also a better measure of the company’s takeover value. EBITDA Multiple is calculated: Enterprise Value/EBITDA =MV of Equity +MV of Debt – Cash/EBITDA =($920.38mill - $172mill)/$200.58mill EBITDA Multiple =3.73x (close to 3.5x) The reason why I do not feel is justified is based off of the projections, the implied enterprise value is $1.563mill. So the revised calculation would be: ($1.563mill
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Licensed to: iChapters User Eugene F. Brigham UNIVERSITY OF FLORIDA Joel F. Houston UNIVERSITY OF FLORIDA Copyright 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove
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Analyses “Ocean Carriers” Objectives of case: The key objective is to develop an understanding of how discounted cash flow analysis can be used to make investment and corporate policy decisions. 1. Determine the value and net present value of a real assets; 2. Distinguishing between book value and market value; 3. Identifying and forecasting incremental expected cash flows, including initial and ongoing capital expenditures, investment in net working capital, and proceeds from asset
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ASC 360-10 for purposes of performing the recoverability test? •How should the multiple operating scenarios impact the recoverability test? •What impact should the potential foreclosure and extinguishment of debt have on the undiscounted cash flows used to perform the recoverability
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sCAPITAL MANAGEMENT LEGG MASON March 16, 2006 Michael J. Mauboussin Common Errors in DCF Models Do You Use Economically Sound and Transparent Models? Discounted cash flow analysis is the most accurate and flexible method for valuing projects, divisions, and companies. Any analysis, however, is only as accurate as the forecasts it relies on. Errors in estimating the key ingredients of corporate value . . . can lead to mistakes in valuation. Tim Koller, Marc Goedhart, and David Wessels
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purpose of the Discounted Cash Flow valuation model is the justification of the value. In the discounted cash flow valuation, the value of an asset is the present value of the expected cash flows on the asset. The information needed to use the discount cash flow valuation is: estimate of the life of the asset, estimate the cash flows during the life of the asset, and estimate the discount rate applied to these cash flows to obtain a present value (Damodaran, n.d.). In the Cash Flow valuation
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