I felt that the book value of debt was still a reliable number. Adding the MV of equity and BV of debt together (11,427 + 1,296) then using that as the base to divide the equity (11427/(11427+1296))=89.81% is the weight of equity. 100-89.81 leads to a weight of debt of 10.19. When it came to calculating the cost of debt I felt the best way to evaluate it would be to estimate what it would cost for Nike to issue more debt from this point in time forward. I did not have information as to whether or not they could get more Japanese debt so cheaply, and the fact that their cost of debt under Joanna is less than the risk free rate does not make any sense.
A 3% nominal annual inflation rate almost doubles the NPV and increases the IRR, however, the project would be as equally as attractive as it was before inflation since both costs and benefits increase by the inflation rate of 3%. Lastly, cash flows were forecasted up to 8 years instead of 6 years for the current machines to account for the two alternative unequal lives. Based on the analysis undertaken, Fonderia di Torino should accept the Vulcan Mold-Maker project
2) Friendly’s total liabilities could not exceed three times the book value of the company’s net worth. a. Based on sales projections for 1989 FCI’s liabilities to equity ratio exceeds this threshold by $2,626,000 (Tab1 – FCI Financials, Exhibit 2). An additional restriction was self-imposed by Ms. Beaumont for her planning scenarios that hold’s Friendly’s interest bearing debt to equity ratio to a maximum of 2:1, which is $2 dollars of debt for every $1 dollar of equity. Again, based on sales projects for 1989/1990 FCI’s this ratio exceeds the established threshold (Tab 1 - FCI financials, Exhibit 3).
For financial reporting purposes, the two most popular methods of accelerated depreciation are the declining balance method and the sum-of-the-years’ digits method. For tax purposes, the allowable methods of accelerated depreciation depend on the tax law that the taxpayer is subject to. In the United States, the two currently allowable depreciation methods for tax purposes are both accelerated depreciation methods (ACRS and MACRS). As a simple example, a company buys a generator that costs $1,000 that is expected to last for 10 years. Under the most simple form of depreciation, the company might allocate $100 of the cost of the generator to its expenses every year, until the $1000 capital expense has been "used up."
• An event or transaction shall be presumed to be an ordinary and usual activity of the reporting entity, the effects of which shall be included in income from operations, unless the evidence clearly supports its classification as an extraordinary item. 2: State the issues of the case. • The Issue of the case is that the company sustained a tax loss of $8.4 million • The loss was primarily due to $10 million in expenses related to product recall Why is the issue of presentation of the recall amount controversial? • The issue was controversial because if reported as an extraordinary item their income from continuing operation will show an increase from the prior year. Why is presentation as an extraordinary item on the income statement a positive choice for the company?
Bonuses were based 100% on corporate EVA while the information reports were rewarded on a mixture of corporate EVA, business unit EVA and team EVA goals. Why the introduction of EVA system at Vyaderm? To maximize firm value, a firm must earn more than its cost of capital. The third performance metric is in %, but captures the spirit of two important (and essentially similar) metrics: Residual income, and Economic Value Added (EVA). These differ only in certain details.
Leveraged Buyout (“LBO”): Assuming an IRR (usually 20 percent to 30 percent), what would a financial buyer be willing to pay? Usually provides a floor valuation. 3. Of the valuation methodologies, which ones are likely to result in higher/lower value? Precedents usually yield higher valuations than trading comps because a buyer must pay shareholders more than the current trading price to acquire a company.
In 2000, both manufacturers believed that Asia would register the world’s highest growth rate over the next 20 years. This is a big part of the reason why Airbus decided to develop the A380. The Boeing’s competitive response against the A3XX will affect the sales of the plane. Initial sales of plane – Financial success depended on getting enough early sales to drive down costs through learning curve effects. The basic idea was that unit costs, such as direct labor, declined as a function of cumulative output.
Question 10 - #93724 If X and Y are independent events, which of the following is most accurate? A) P(X | Y) = P(X). B) P(X or Y) = (P(X)) × (P(Y)). C) P(X or Y) = P(X) + P(Y). Question 11 - #93542 A T-bill with a face value of $100,000 and 140 days until maturity is selling for $98,000.
At 10 cents each, the expected revenue of $500 per day, and the amount will be lost while the copier is broken. The standard number of breakdowns per year to be 12.255 (dividing 52 weeks/year by 4.243 weeks/breakdown), the profit lost per breakdown to be $1,125 (days lost/breakdown * revenue lost/day), and finally the profit lost per year due to breakdowns to be $13,787 (breakdowns/year * profit lost/breakdown). 6. The profits lost per year due to breakdowns is $13,787, which is bigger than $12,000, they should procure a backup copier. A high