Prof. Bjorn Johnson Date: 02/25/2013 Subject: Midland Energy Resources, Inc. Analysis Janet Mortensen, senior vice president of project finance for Midland Energy Resources, needs to estimate the cost of capital because it is an important data for estimating the project whether it will be profitable and worth the resources and risk. As mentioned in the case, Midland estimates the cost of capital to be used in analyzing asset appraisals for capital budgeting and financial accounting, performance
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General Motors went a bit too far and had a class action suit against them. They settled in 2008 for $303 million to its shareholders. “The two-year-old class-action lawsuit stems from claims that GM issued false and misleading statements about its finances to artificially inflate the company’s stock price and debt securities “(General Motors 2005). The problem with short term orientation is that the company may take money from other areas to achieve earnings that are expected of them. This money can
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QUESTIONS FOR THE OVERALL ASSIGNMENT 1. What is the best way to estimate the company and divisions’ cost of capital? Answer: The best way to estimate the cost of capital is by using the CAPM (Capital Asset Pricing Model) where the Weighted-Average Cost of Capital (rwacc) is given by the formula [pic] Where, D is the market value of the net debt E is the market value of the total equity V is the total market value of debt and equity = D + E
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Analysis Diamond Chemicals Introduction This project belongs in the engineering-efficiency category; therefore, it has to fit at least 3 of 4 performance hurdles, which are 1. Impact on EPS; 2.Payback; 3.Discounted cash flow and 4. Internal rate of return. In this article, some of those involved explained and described their opinions; however, professional knowledge may have been lacking. Therefore, we will expound and clarify below. Management Analysis Capital Expenditure On the surface
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Interest factor in each of the cases shown in the following table. Compare the calculated value to the value in Appendix Table A–1. Case Interest rate, i Number of periods, n A 12% 2 B 6 3 C 9 2 D 3 4 A FVIF 12%,2 periods = (1 +.12)2 = 1.254 B FVIF 6%, 3 periods = (1 +.06)3 = 1.191 C FVIF 9%, 2 periods = (1 +.09)2 = 1.188 D FVIF 3%, 4 periods = (1 + .03)4= 1.126 P4-3 Future values For each of the cases shown in the following table, calculate
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Strategy case study: Starbucks-sacrificing dividends for growth Starbucks has grown a lot since it's opening in Seattle in 1985. It went from 17 stores, to over 15.000 stores all around the world in 2010. But they are changing their strategy, and purpose. They started closing down shops, and refocused on the Starbucks experience, which would increase customer's willingness to pay and also increase profitability. They even payed their first dividend 2010. That ment a huge change of purpose. But
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increase more than the cost. Thus, gross profit increase. * More efficient in terms of cost and operating expense and finance cost. (Reductions) * Fully utilized resourcers – hire competent workers,etc - reduce cost * Finance cost reduce – In 2012, they buy another $200m of bank loan which has 10% of interest. However, due to the overdraft of 126-120 = 6. Their current finance cost is 20-6 = 14. Thus there is changes in the EBT – cost reduce * Sales increase 8% more than the market share
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ETHICS IN FINANCE Meaning of Ethics Ethics is the study of human behavior which is right or wrong. In general, ethics means doing right things to others, being honest to others, being fair and justice to others. Even ethics in finance is a compartment to general ethics. Ethics are very important to maintain constancy in social life, where people work together with one another. In the process of social development we should not be conscious of ourselves but also conscious to take care of others
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Prof. Wajeeh Elali Ahlia University & George Washington University EMSE 6410 / Fall 2015 Case # 1 Time Value of Money(*) Assume today is November 5, 2015. Natasha Kingery is 30 years old and has a Bachelor of Science degree in computer science she is currently employed as Tier 2 field services representative for a telephony corporation located in Seattle, Washington, and earns $38,000 a year that she anticipates will grow at 3% per year. Natasha hopes to retire at age 65 and has just begun to
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Reporting Practice and Ethics HCS/405 Health Care Financial Accounting June 29, 2015 In order to function properly, every company or organization should have a financial plan in place. Health care organizations are part of the service industry and are no exception and cannot successfully operate without proper financial management. Financial management involves the managing of organizational funds in order to meet organizational goals and plays an important role in helping organizations work
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