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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may use Excel and a calculator. 2) Point totals for each question are specified in parentheses. There are 220 total points. 3) Circle your numerical answers. This makes it easier for me to find them. Show all calculations and the inputs of all values solved for using your calculator or Excel. This allows me to determine how your numbers were arrived at. If you get stuck on the math, tell me what the correct answer should be based on your intuition. Incorrect numerical answers based on the correct
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will charge 10.25% interest while Regions best will charge 13.99%. 3. APR of 8.6% monthly comes out to EAR of 8.95% monthly EAR=(1+.086/12)^12 -1 EAR=(1.0072)^12 -1 EAR=1.0895-1 EAR=8.95% Annuity present value = 6,950,000=C x (1-PVF)/r 6,950,000=C x (1-1/1.0895^5)/0.0895 6,950,000=C x (1-1/1.5351)/0.0895 6,950,000=C x (1-0.6514)/0.0895 6,950,000=C x 0.3486/0.0895 6,950,000=C x 3.895 C=1,784,338.89 The monthly
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the debt is that you will not have to keep paying finance charges. For example a $ 10,000 debt with a 14% interest rate will cost you $ 6,889.60 in interest over the course of a four year term. One benefit to paying these charges if you pay them on time it will help your credit score stay higher. One benefit to putting your money in a savings account is that it is safer there in the account. I would have to say that one of the cons of
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Assignment 1-Financial Research Report FIN 534: Financial Management Hannah Fox Dr. Dana Leland August 30, 2015 The U.S. publicly traded company that I have selected is Kroger. Kroger is a grocery retail chain in the US. It operates supermarkets and multi-department stores under a number of banners including Kroger, Harris Teeter, Ralphs, Fred Meyer, Food 4 Less, Fry's, King Soopers, Smith's, Dillons, Jay C, QFC and City Market. According to The (Kroger Co. SWOT Analysis, 2015), the company
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justifiable price of common stock? The dividend discount model (DDM) states that the price of the stock at a given time is: Po= Div1/ (r-g) where; Po= value of the stock, Div1=Dividend distributed the following year, r= required rate of return, g=growth rate of dividends, the growth rate “g” is assumed to be constant. The value of the stock can also be found based on the following over time: Po = Div1/ (1+r) + Div2/ (1+r) 2 + Div3/ (1+r) 3 + (Divn +Pn)/ (1+r) n Therefore, Po, P1, P2 and Pn can be
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No concrete decision criteria to indicate whether an investment increases the firm's value 2. Ignores cash flows beyond the payback period 3. Ignores the time value of money 4. Ignores the risk of future cash flows Discounted Payback Period Advantages Disadvantages 1. No concrete decision criteria that indicate whether the investment increases the firm's 1. Considers the time value of money value 2. Considers the riskiness of the project's 2. Requires an estimate of the cost of capital
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The NPV generated from launching LTAC facility is forecasted as $24.7 million by the discount rate of 7.84%. Internal rate of return (IRR) is found to be 9.78%, above the discount rate which indicates a positive return on LTAC project. The present value of the perpetuity is projected to be $23.3 million, discounting back all the future cash flows with 5% long-term growth rate and WACC derived from the average of for-profit health care companies’ financials. The perpetuity at year 10 takes into consideration
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Review of time value of money Simple interest Example: A firm borrows $1,000 for a year at 10% simple interest per year. How much must the firm repay after one year? FV = future value = 1,000(1+r) = 1,000 (1.1) =1,100 What if the loan is for 3 years, at compound interest of 10% per year? If compounding is annual: FV = 1,000 (1+r)3 = 1,000 (1.1)3 = 1,331 3 Review of time value of money In general, FV = PV (1+r)t = PV * FVIF (r, t) FVIF = future value interest factor
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investment of £9.00 million will be necessary in plant and machinery. This expenditure can be written off (capital allowances) for tax purposes on a straight-line basis over the product’s expected six year life. It is anticipated that the re-sale value of the equipment will be about £2.00 million at the
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