MULTINATIONAL CAPITAL STRUCTURE and COST OF CAPITAL ➢ Capital structure – refers to the proportion of LT debt and equity and the particular forms of capital chosen to finance the assets of the firm ➢ Mgment must choose: ■ the proportions of D and E ■ the currency of denomination ■ fixed or floating rate interest payments ■ indenture provisions ■ conversion features ■ seniority ■ maturity o Perfect mkt assumptions: -frictionless mkts -equal access
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measures variance. | Topic: Analyze how markets adjust for risk. Question: A company’s beta is -1.5. If the overall stock market decreases by 5%, what is the expected change in the firm's stock price? Answer Rationale: Beta is a measure of volatility. The higher the beta, the more volatile the stock. A negative beta means the stock is volatile up when the market is down. | Topic: Apply the capital-asset pricing model to calculate a business’s required return. Question: Dimensions of risk
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Chapter 2: Real Options Chapter Introduction and Objectives: Managers often overrule NPV based recommendations in capital budgeting on strategic grounds. Does it mean that the NPV approach is flawed? The standard DCF methodology assumes that managers make an investment decision and then see how the market evolves. In many situations managers can wait and then make a decision. The latter is an option - an option to defer or time the investment decision. Pharmaceutical companies, for example
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Learning report. This text is based on the ‘Modelling Asymmetric Co-movement of Asset Returns’, authored by Kenneth F. Kroner and Victor K. Ng published on Review of Financial Studies, Vol.11, No.4. 1998. The paper questioned the utilization of various time-varying co-variance models since these models have much too restrict formations in the pattern of how the stock performance in the history impacts the estimated, and thus forecasted, co-variance matrix. The paper examined four types of most
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capital. With each analysis Martin tried to forecast the value of Cox stock in the year 2000 by making certain assumptions. With EBITDA multiple analysis and target price of $50, the market capitalization of Cox is increased which in turn increases the implied Cable value, and an EBITDA multiplier of 20.9 times is realized. Because Martin believes that the EBITDA multiplier
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Dimensional Fund Advisors 1. What are the primary academic finds that DFA are trying to exploit in their funds? Dimensional Fund Advisors Investment (DFA) uses two primary academic strategies. The first is Size Effects based on the finding of Rolf Banz. Banz’ research found that small stocks consistently outperformed large stocks over the entire history of the stock market from 1926 through the late 1970s. The second academic strategy DFA used was the Book to-Market effect based on the finds
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In the United States, avoiding the fiscal cliff, promptly raising the debt ceiling, and developing a medium-term fiscal plan are of the essence. In emerging market economies, policymakers should be ready to cope with trade declines and the high volatility of capital flows. A better Q1, a worse Q2 Global growth increased to 3.6 percent (seasonally adjusted annual rate) in the first quarter of 2012, surprising
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options, can be traced back to the willingness of risk-averse economic agents to guard themselves against uncertainties arising out of fluctuations in asset prices. By their very nature, the financial markets are marked by a very high degree of volatility. Through the use of derivative products, it is possible to partially or fully transfer price risks by locking-in asset prices. As instruments of risk management, these generally do not influence the fluctuations in the underlying asset prices
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Human Behavior and the Efficiency of the Financial System by Robert J. Shiller* Abstract Recent literature in empirical finance is surveyed in its relation to underlying behavioral principles, principles which come primarily from psychology, sociology and anthropology. The behavioral principles discussed are: prospect theory, regret and cognitive dissonance, anchoring, mental compartments, overconfidence, over- and underreaction, representativeness heuristic, the disjunction effect, gambling
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Hilton worldwide Financial analysis: With the initialization of the company in the year 1919, it made a really good start and took out a lot of contemporary competitors during the period of the 20th century. By the end of the year 2013, Hilton worldwide underwent a drastic financial enhancement and there was an increase of 5.2 percent on the overall revenue for each and every room. In addition to that, the overall adjusted EBITDA was increased to a height of 13 percent. This was absolutely a huge
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