AGENDA: CAPITAL BUDGETING DECISIONS A. Present value concepts. 1. Interest calculations. 2. Present value tables. B. Net present value method. C. Internal rate of return method. D. Cost of capital as a screening tool. E. Further aspects of the net present value method. 1. Total-cost approach. 2. Incremental-cost approach. 3. Least-cost decisions. F. Uncertain future cash flows. G. Preference rankings. H. Payback period method. I. Simple
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CASE STUDY FOR FINANCIAL MANAGEMENT CASE 4: The Battle for Value, 2004: FedEx Corp. vs. United Parcel Service, Inc. VALUE CREATION AND ECONOMIC PROFIT I. OUTLOOK OF CASE 4 Case 4 mentions about the competition between two leading companies in package- delivery market. FedEx which is the largest foreign presence in China, with 11 weekly flights, serving 220 Chinese cities, so the company’s volumes in China had grown by more
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operating managers of the firm. In a legal sense, the directors are "principals" and the shareholders are "agents." A) True B) False Q#3 In capital budgeting, the financial manager tries to identify investment opportunities that will increase the value of the firm. A) True B) False Q#4 Three advantages of the corporate form of organization are the ease of transfer of ownership, limited liability for the shareholders and an unlimited life for the business entity. A) True B) False Q#5 The intent of
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2011 - 2015. For comparison, a sensitivity analysis is carried out to show the company performances during good times and bad times. Telstra Corporation Limited is taken as a benchmark due to its huge success in Australia. The trends show very positive results indicating management efficiency, asset efficiency and operations efficiency. ATH beta was calculated against the STRI values of the market and ATH. This was then used to determine WACC of the company. Beta was found to be 0.6 indicating
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What is the annual cost of the landfill cleanup, including amounts to retire the bond issue? The second part of the case, The Old Brownsville Road Landfill, talks about the cleanup costs related to the Brownsville site. In order to fund the one-time cleanup costs of $35,778,500 (please see question 1 for details), the city has to issue a bond. The bonds carry an annual interest rate of 8 percent and the entire principal is due in 20 years. To lower the risk of the bondholder and to ensure that the
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can you say about the company’s liquidity position in 2013? 4. Calculate the 2013 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. 5. Calculate the 2013 debt ratio, liabilities-to-assets ratio, times-interest-earned, and EBITDA coverage ratios. What can you conclude from these ratios? 6. Calculate the 2013 profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios? 7. Calculate
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premium over the current GEICO stock price of $55.75. This report attempts to determine a range of appropriate stock prices for GEICO. Using the Gordon dividend discount model, along with historical dividend information and projections by Value Line, we estimate the value of GEICO stock in the range of $58 to $80. A review of historical growth rates in GEICO dividends also lends credibility to the investment’s future potential. • Review of Warren Buffett’s investment record. While our analysis lends credence
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Chapter 11 Efficient Capital Markets: Evidence 1. Roll’s critique (1977) is based on the assumption that capital markets are in equilibrium. What happens when the market is not in equilibrium? Suppose new information is revealed such that the market must adjust toward a new equilibrium which incorporates the news. Or suppose that a new security is introduced into the marketplace, as was the case of new issues studied in the Ibbotson (1975) paper. Given such a situation, the abnormal performance
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Question 1: John and Judy DeRight are cousins whom share the same investment manager, Angus Cartwright, III, and are both looking to diversify their assets in future investments. Judy is the owner of her own chemical company that earns in excess of $1.6 million before taxes and $1.1 million after taxes per year. Although she has received numerous offers, Judy does not wish to be bought out by anyone and thus desires to diversify the investments she already owns. She currently has over $16 million
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can you say about the company’s liquidity position in 2013? 4. Calculate the 2013 inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. 5. Calculate the 2013 debt ratio, liabilities-to-assets ratio, times-interest-earned, and EBITDA coverage ratios. What can you conclude from these ratios? 6. Calculate the 2013 profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these
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