per share. The firm also has $2M market value of bonds trading at a yield to maturity of 6.2%. The sales revenue of Artforever.com is represented in Table 1, Exhibit A. In addition to its sales revenues, Artforever.com currently has $1.475M in long-term debt. Since Artforever.com is a privately held firm, the analysis of the value will be completed utilizing a comparable publicly traded firm, Arttoday.net. The purpose of this paper is to analyze the value of Artforever.com and evaluate the potential
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Lifetime Value Lifetime value (LTV) is calculated initially for groups (segments) of customers. Once determined, it can be attributed back to individual members of the group. To understand LTV, let’s look at a typical lifetime value table calculated for a group of 50,000 bank customers who have the same credit card performance as that shown by the previous example. Year 1 6.0% Year 2 8.0% 3,000 Year 3 10.0% 3,240 a Referral Rate b Referred Customers c Retention 75.0% 80.0% 85.0% Rate d Retained
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M2 CAPITAL BUDGETING RISK prof a s khalsa, iper pgdm 1 Nature of Risk Ç Risk exists because of the inability of the decision-maker to make perfect forecasts. Ç In formal terms, the risk associated with an investment may be defined as the variability that is likely to occur in the future returns from the investment. Ç Three broad categories of the events influencing the investment forecasts: 4 General economic conditions 4 Industry
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its uses? 8. What is workday and WORKDAY.INT functions in Excel? What are its uses? 9. What is Net Present Value? How do NPV and XNPV function work in Excel? What are its uses? 10. What is internal rate of return (IRR)? How do IRR, XIRR, and MIRR work in Excel? What are its uses? 11. What is present value? How does PV function work? What are its uses? 12. What is Future Value? How does FV function work? What are its uses? 13. Write down the functions of PMT, PPMT, IPMT. How can
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f_3=〖DF〗_2/〖DF〗_3 -1=0.8767/0.8255-1=0.062023≅6.20% (c) What should the price of a 3-year bond with a face value of $100 and a 6% annual coupon be? We calculate the bond price by discounting the annual cash flows by the discount factors from (a): P=〖DF〗_1*〖CF〗_1+〖DF〗_2*〖CF〗_2+〖DF〗_3*〖CF〗_3 P=0.9346*$6+0.8767*$6+0.8255*106 P=$98.37 (d) A 3-year bond with a face value of $100 and a 4% annual coupon is trading at $95.00. Show that this bond is mispriced by showing how you would
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operations department, and facilities department. From our initial investment data, we assumed a winglet cost of $700,000 per aircraft, installation of $56,000 per aircraft, and an additional day of downtime for each aircraft at $5,000 per day. The total value of the winglet installation per aircraft was $761,000 which was depreciated over a 7-year modified MARCS depreciation schedule. In addition to winglet installation, facility upgrade charges were deemed necessary by our Facilities Director. The
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Instructions 1 Open Microsoft Excel. Create a two-column table, with one column titled "Year" and the second column titled "Cash flow." For this example, assume $75,000 has been invested in a business. The return from that $75,000 will be tracked over a 10-year period. Initially, the return on the investment will be small, but over time it should grow. 2 Enter the numbers 1 through 10 in the "Year" column. 3 Enter the following numbers for each of the years: "-75,000, 2,000, 4,000, 5,000, 7,000
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Its operations exhibited moderate and consistent growth, required little capital investment and carried low debt levels. Its problems—a declining return on assets and falling inventory turnover—appeared fixable. And it offered significant break-up value. Valuing RJR's equity at the time of the LBO requires detailed knowledge of the company's operations and extensive number crunching. The analysis is obviously quite dependent on the assumptions made about cash flow in the post-LBO period, as well as
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com/abstract=1764024 The WACC Fallacy: The Real Effects of Using a Unique Discount Rate Abstract We document investment distortions induced by the use of a single discount rate within firms. According to textbook capital budgeting, firms should value any project using a discount rate determined by the risk characteristics of the project. If they use a unique company-wide discount rate, they overinvest (resp. underinvest) in divisions with a market beta higher (resp. lower) than the firm’s core industry
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