INTRODUCTION OBJECTIVE: To understand the information contained in financial statements with a view to know the strength or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby enabling the financial analyst to take different decisions regarding the operations of the firm. RATIO ANALYSIS: Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative) factors of a company. The other side considers
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SOLUTION TO INTEGRATIVE CASE PROBLEM: COST OF CAPITAL 1. Cost of debt: ki = 9%(1 - 0.4) = 5.4% for the first $50 million ki = 10%(1 - 0.4) = 6% for debt exceeding $50 million. Cost of equity: (g = 7.2% using the Rule of 72) ke = $1.415/$21 + .072 = .139 or 13.9% for internal equity ke' = $1.415/$19 + .072 = .146 or 14.6% for external equity 2. Size of first interval: $50 million first mortgage bonds/0.40 = $125 million. (Balance of first block of funds
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Solutions to Assigned Problems Chapter One 2. Example One: An individual opens a savings account at a local commercial bank with a $200 deposit. The bank loans out the $200 with other funds from other savings accounts to a local business man who is expanding his business. The local business man pays back the loan overtime with interest and the bank credits the savings account with interest. The individual withdraws money from the savings account to buy a new bike. Example Two: An individual
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involve management of revenues and expenses, efficient allocation and use of firm assets as well as sound (positive NPV) investment decisions. • Financial market strategies involve prudent management of liabilities and optimal mix of debt and equity in funding firm operations and investments. • Finally financial market strategies require optimal distribution decisions that would balance firm’s reinvestment needs and shareholder wealth. © Dr. C. Bulent Aybar Creating Value Through Growth
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capital structure and is equal the capitalization rate of a pure equity stream of its class” (Modigliani, Miller 1958). In Proposition II, Modigliani and Miller argue that “that the expected yield of a share of stock is equal to the appropriate capitalization rate for a pure equity stream in the class, plus a premium related to financial risk equal to the debt-equity ratio times the spread between” the capitalization rate and the return on debt. The most important implication of this theory is that
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three which is consists of General Motors (GM), Ford and Chrysler, Volkswagen and BMW. The company deals in Cars, SUV’s and Minivan etc. The general issue of this case should they push for a more aggressive timing of launch or given the technical problems or delay the program to ensure a smoother launch? Situational Analysis External Macro Environment Analysis DEEP-LIST Demographic * With 9 million new registrations, united states was the largest national market which was followed by
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[pic] Many fleet cars were bought with an option to sell them back to the manufacturer. Such vehicles were called “program cars”, as distinct from “risky cars” which were not covered by a put option. Roughly 85 % of Hertz’ domestic fleet and 74 % of its international fleet were program cars. Program cars will become more expensive in the future due to the fact that Ford and GM adopted new market strategies that deemphasized lower-margin sales of program cars Risk cars exposed the company to residual
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Damodaran 1 The fundamental question: Does the mix of debt and equity affect the value of a business? Assets Existing Investments Generate cashflows today Includes long lived (fixed) and short-lived(working capital) assets Expected Value that will be created by future investments Assets in Place Debt Liabilities Fixed Claim on cash flows Little or No role in management Fixed Maturity Tax Deductible Growth Assets Equity Residual Claim on cash flows Significant Role in management Perpetual
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Solutions to End-of-Chapter Questions and Problems in Multinational Finance by Kirt C. Butler Second Edition PART I Overview and Background Chapter 1 Introduction to Multinational Finance Answers to Conceptual Questions 1.1 Describe the ways in which multinational financial management is different from domestic financial management. Multinational financial management is conducted in an environment that is influenced by more than one cultural, social
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Caterpillar Inc. Analysis FIN400 – Analyzing Financial Statements June 23, 2013 Caterpillar Inc. Analysis Caterpillar Inc. is a global company headquartered Peoria, Illinois. They specialize in the manufacturing and selling of construction, mining, and farm equipment. Caterpillar Financial Services is a subsidiary company that offers financing options to their customers. I currently work of a construction company and I specialize in the accounting management of the company’s
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