Study Guide Financial Management: Theory & Practice Fourteenth Edition Eugene F. Brigham University of Florida Michael C. Ehrhardt University of Tennessee ________________________________________________________________________________ Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third
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using NOPAT to reflect firm’s return from its operations: EVA = NOPAT – After-tax dollar cost of capital used to support operations = NOPAT – (Total net operating capital x WACC) Where, NOPAT = Net Operating Profit After Taxes WACC = Weighted Average Cost of Capital Total Net Operating Capital is another term of Invested Capital (IC) From this formula, it can be seen that EVA represents the residual income that remains after the cost of all capital, including equity capital, so that it shows
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| Coca-Cola’s Financial Analysis | Financial Management | | | | Table of Contents Page Introduction……………………………………………………………………………….. | 2 | Table 1: Ratio Calculations …………………………………………………………........ | 3 | Three-Year Trend of Financial Ratios……………………………………………………. | 4-6 | Comparison of Company’s Performance to Industry…………………………………...... | 6-8 | Recommendations for the Company ……………………………………………………... | 8 | Conclusion………………………………………………………………………………… | 9 |
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000, equal to its par value. a. What is the payback period for this bond? b. With such a long payback period, is the bond a bad investment? c. What is the discounted payback period for the bond, assuming its 4 percent coupon rate is the required return? What general principle does the example illustrate regarding a project’s life, its discounted payback period, and its NPV? a. Payback on this bond is 25 years. You pay $1,000. You receive $40 a year for 25 years, a total of $1,000. b. The bond
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The Pecking Order Free Cash Flow/Managerial Constraint 40 % Debt Scenario Personal taxes lessen the advantage of corporate debt: corporate taxes favor debt financing since corporations can deduct interest expenses. Personal taxes favor equity financing, since no gain is reported until stock is sold, and long-term gains are taxed at a lower rate. The use of debt 40 % Debt Scenario financing remains advantageous, but benefits are less than under only corporate taxes. Firms should still
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give a neutral, that is, non-judgmental description of Damodaran’s country risk premium concept (CRPC). We will also attempt to provide a detailed reconstruction of Damodaran’s thought process which led to this approach. Risk-return models The cost of capital for risk-return models
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Therefore, the relevant information about notes payable, long term debt and total common equity are taken into consideration, which are provided in Table 1 of the case. Table 2 indicates a total market values of 392.650.378,84€, which is 81.637.621,16€ les compared to the belonging book values. While the book value of notes payables is the same for the market value, the long term debt as well as the total common equity differ in this respect. Using the formula provided in the case the present value (PV)
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FIN 254 Part 1: Introduction and Methodology INTRODUCTION OF HEIDELBERG CEMENT BANGLADESH: Heidelberg Cement Bangladesh is one the largest producers of quality cement in Bangladesh. Heidelberg Cement Group from Germany, one of the world’s leaders in construction and building material with operations in more than 50 countries, owns 61% shares of the company. In 1998 Heidelberg Cement Group established its presence in Bangladesh by setting up a floating terminal with on board bagging facilities
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Long-Term Debt 2.9 6.1 11.6 0.1 Convertible Bonds 27.5 - - - Unearned Revenue 1.1 1.5 1 0.9 Stockholders’ Equity Common Stock 0.1 0.2 0.2 0.1 Additional Paid-In-Capital 19.5 13.9 18.8 1.6 Retained Earnings 12 19.4 17.4 15.3 Total Equity 31.6 33.5 36.4 17 Total Liability & Equity 100 100 100 100 Net Sales 100 100 100 100 Cost of Goods Sold 77.2 74.1 75.9 77.9 Gross Profit 22.8 25.9 24.1
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above-average returns for shareholders over the past 25 years. Fairfax's insurance business has had little to do with the company's success other than providing the temporary capital with which to make its investments. I say “temporary” because that is exactly what Fairfax’s float has been. On average, Fairfax’s insurance business actually costs it 2% of float a year. But Watsa’s ability to seek out above-average returns has allowed for this 2% to be covered and still provide superior returns. This
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