The basic answer is that share repurchases are great when the share price is undervalued, and not-so-great when the share price is overvalued. To put it into a more useful context, if you would otherwise reinvest your dividends or invest new capital into the company at current stock prices, then share repurchases are useful to you because the company basically does it for you. The alternative is that the company could pay you a higher dividend, but you’d be taxed on that dividend and reinvest it into the company anyway. On the other hand, if you would not reinvest dividends or invest new capital into the company at current prices, then share repurchases are not in alignment with your current outlook, and it would be better for you to receive a higher dividend. Something else to be considered is that when a company uses money for share repurchases when it could be paying a higher dividend instead, the company’s management is limiting your control and increasing theirs.
The bid-ask spread is also a cost to the dealer. Reducing the bid-ask spread would make prices more competitive and also lower costs. Section 2 Strategy # Description 15 Better .02 Match Depth All Full No Inv MgmtBid price is 0.02 more than the other dealers bid price. Ask price is 0.02 less than the other dealers ask price. 16 Inventory Management in Depth Cutoffs = 30 When the cum.
If this year the sales mix is different than the historical average, explain what affect this would have on the breakeven point. Any change in proportion in which the products are sold has significant impact on the break-even point. ("Sales mix and break-even point analysis - explanation and example | Accounting For Management", n.d.) If the sales mix changes, the effect on the breakeven point will depend on the unit contribution margin. If the sales mix were changed in favor of the type of aircraft with the higher unit contribution margin than the breakeven point will actually be reduced because of the higher total revenue. Conversely if the sales mix were changed in favor of one of the lower contribution margin aircraft then the volume of aircraft sold would need to be increased in order to make up for the reduced profit per aircraft.
Precedents usually yield higher valuations than trading comps because a buyer must pay shareholders more than the current trading price to acquire a company. This is referred to as the control premium (use 20 percent as a 31 Customized for: JJ (jchen59@wisc.edu) Vault Guide to Private Equity and Hedge Fund Interviews Finance benchmark). If the buyer believes it can achieve synergies with the merger, then the buyer may pay more. This is known as the synergy premium. Between LBOs and DCFs, the DCF should have a higher value because the required IRR (cost of equity) of an LBO should be higher than
Competitive exposure affect the company the ability to compete internationally. Frequently it 's do is to chase you to change foreign currency values. Why is GM worried about the yen? Answer 1: GM is worried about the level of the yen, because its Japanese competitors could gain a cost advantage in the event of a Yen depreciation. As these competitors derived roughly 50% of their revenues from the U.S. market, a depreciation of the Yen could allow for greater incentives and savings to be passed onto U.S. consumers.
(3) Price reduction of 20% -Pros: competitive the price with other company. Increase the sales in do-it-yourself market. -Cons: the quality will be questioned. Could decrease the sales. (4) Add additional sales reps at a direct cost of $60,000 each -Pros: could have professional motivation team could increase the sales.
Question 3 Which price increase is needed to offset the profit impact of the increased raw material costs (assuming that volumes are constant)? Which price decrease will result from instituting price-flex (assume a best case and a worst case)? Answer 3 The selling price would increase by offsetting the raw material cost which is given in the “Appendix A” which shows that increase in the price by 6.5% would result in the positive side and a reductioncompany from reduction in the price. Understanding all this is done with respect to the case material. The volume is a constant which is assumed at 80% in the analysis of the price.
Options 1: Harvest Professional-Tradesmen Channels; * In this strategy, B&D would focus on the Consumer and Professional-Industrials segment, focus on profitability even expense of market share * Option appears reasonable, but it could be damaging to the B&D Corp. * According to BCG approach, the decisions should be based on SBUs relationship to market growth rate and market share. * In the BCG matrix below, since Makita has 50% market share and B&D has 9%, relative market share for B&D is 0.18x * If B&D chooses to harvest the company, focus on profit rather than market share and wind up forcing the company to become a dog when it could have the potential of being a star. * One major factor the 1st option ignores is the high product ratings, which shows great deal of potential. 2: Get Behind Black & Decker Name with Sub-Branding * In this strategy, B&D can sub-brand current products in order to re-establish the brand. * Presents a way to tap the potential of high product ratings by rejuvenating the brand Issue –with brand currently: * negative view of the B&D brand * OTJ site, tools are status symbol * Thus by adding catchy names like ‘Piranha’, ‘Sawcat’, ’Super Sawcat’, B&D could theoretically raise its brand image…..
Consumers would normally spend on the higher utility and in this instance that product is product A. However, the more customers purchase product A, the extra satisfaction will decrease and the utility of B will increase since you will now hardly have a demand for it. Equilibrium will be restored as one utility goes up, the other one goes down. Let us assume the income of the consumer goes up by 5%, this will mean: Income =$100 + $5 = $105.00 Product A $ 5.00 per unit Product B $11.00 per unit With an income of $ 105.00 a consumer can purchase 21 units of product A and 9 units of product B (yellow line) There was an increase in purchasing power for the consumer, however because the price of A was lower, the consumer substituted, since the price of B increased the extra money will go to this product, thus maintaining the same bundle, and an equilibrium state will continue to remain. 2|Page Question 3 ISOQUANTS In Figure 3.0 although points A, B, and C all involve different combinations of capital and labor, output is equal to Q0 with each of these combinations.
The Body Shop Case Recommendation Our recommendation for The Body Shop to fulfill its financing needs they will need to borrow 82.4 million GBP for 2002, 106.5 million GBP for 2003, and 132.9 million GBP for 2004. This financing need will be relatively high we believe, thus we would advise that The Body Shop cut back on unnecessary expenses, discontinue product lines that don't sell well, close stores that not make good revenue, expand more in ecommerce, and increase profit margins accordingly for a better net profit. For better growth of the company we suggest The Body Shop look more closely in to making products that have a lower cost to produce and create more new products that would differentiate them from its competitors. Also seeing that The Body Shop doesn’t have a marketing or advertising department we recommend they look more into possibility creating one to increase its presence. Company Background The Body Shop opened its first store on March 26th 1976 in Brighton England.