Do you have any concerns about the suitability of the listed “pure-play” comparable companies? Might these concerns bias your estimate of value in any direction? Perform a sensitivity analysis on assumptions that you suspect to be “key value drivers”—what are the insights you derive from this analysis? Consider other methods of estimating Calaveras’s value, including book, liquidation, and multiples methods. 2.
This figure definitely could be different for different customers. 4. Suppose one of GP Manufacturing’s executives typically uses the payback as a primary capital budgeting decision tool and wants some payback information. a. What is the project’s payback period?
This stage is used to help realise if the current financial position is likely to lead to achieving the goals you set out – this can be done through research of seeking out professional advice. The next stage is Decide – this is where you decide on your action points to achieve your goals. This can be done through deciding to use financial products to achieve your goals, setting budget to decrease expenditures or exploring increasing income or holding back on planned expenditures. Stage 3, Act, is the implementation stage. This is putting your action points from the Decide stage into action to achieve the goals laid out in the assess stage – whether it is shopping around for the best value financial products, or looking for ways to increase your income.
2. Which of the following statements about valuing a firm using the APV approach is most CORRECT? a. The value of operations is calculated by discounting the horizon value, the tax shields, and the free cash flows at the cost of equity. b.
This is a good assumption when debt represents a fairly small fraction of the firm’s value. Questions: 1. How can the Capital Asset Pricing Model be used to estimate the cost of capital for a project (as opposed to a financial asset)? In particular, how can we apply the CAPM to estimate the cost of capital when we do not even know how the investment in the project will be financed (debt vs. equity)? (Here you think in terms of the risk of the project, or project beta, or asset beta).
Peter Swap I. Issue: Will recognizing compensation expense as part of Mizri Corporation’s stock compensation plan faithfully represent the exchange? II. GAAP List: * 718-10-30-22: An equity instrument for which it is not possible to reasonably estimate fair value at the grant date shall be accounted for based on intrinsic value * 718-20-35-3: A modification of an equity award shall be treated as an exchange of the original award for a new award incurring additional compensation cost for any incremental value III. Alternatives: A.
Answer | | If new debt is used to refund old debt, the correct discount rate to use in the refunding analysis is the before-tax cost of new debt. | | | The key benefits associated with refunding debt are the reduction in the firm's debt ratio and the creation of more reserve borrowing capacity. | | | The mechanics of finding the NPV of a refunding decision are fairly straightforward. However, the decision of when to refund is not always clear because it requires a forecast of future interest rates. | | | If a firm with a positive NPV refunding project delays refunding and interest rates rise, the firm can still obtain the entire NPV by locking in a low coupon rate when the rates are low, even though it actually refunds the debt
What is the cost of common equity? (5 pts) b. Explain the advantages and disadvantages to use the CAPM model as the method to compute the cost of common equity. Compare and contrast this method with the dividend growth model approach. (10 pts) 3.
Normally, a reconciliation is required between the proprietary fund financial statements and the business-type activities column in the government-wide financial statements. C. Statements include the Statement of Net Assets (Balance Sheet); Statement of Revenues, Expenses and Changes in Fund Net Assets: and Statement of Cash Flows. D. The Statement of Cash Flows may be prepared using either the direct or indirect methods. 7. Which of the following choices regarding the fiduciary fund financial statements is true?
Can the firm repay its loan within a reasonable period? 3. What are the key driver assumptions of the firm’s future financial performance? What are the managerial implications of those key drivers? That is, what aspects of the firm’s activities should Koh focus on especially?