a. b. What is the minimum level of synergies for Vodafone shareholders to at least break even on the deal? Estimate the market’s assessment on December 17, 1999 about the likelihood that the deal will succeed. To do so, construct a merger arbitrage position where you buy one Mannesmann share (at the price prevailing on December 17, 1999) and sell short 53.7 Vodafone shares. Assume that the deal finalizes in 3 months time and a risk—free interest rate of 5.5%.
dividend paid by the stock and the appreciation of stock price since the investment was made. From the profitability point of view, factors such as dividend yield and stock appreciation over the last 5-yr period are used as the major decision making criteria to decide whether to invest in any of these two companies, if so, which one? Other financial data are used to verify the financial health of the two companies. The supporting financial data is equally important in the final decision since the profitability of a company can’t guarantee its long-term viability. Other financial data are used to verify
Assuming Dell sales will grow 50% in 1997, how might the company finance this growth? Might it be able to finance this growth internally? How much would working capital need to be reduced and / or profit margin increased to achieve internal financing? What steps do you recommend the company take? 5.
The firm is currently having problems cost effectively meeting run length requirements as well as meeting quality standards. The general manager has proposed the purchase of one of two large six-color presses designed for long, high-quality runs. The purchase of a new press would enable LI to reduce its cost of labor and therefore the price to the client, putting the firm in a more competitive position. The key financial characteristics of the old press and the two new presses are summarized in what follows. Old press – Originally purchased 3 years ago at an installed cost of $400,000, it is being depreciated under MACRS using a 5-year recovery period.
Should you elect to participate, how much do you plan to contribute annually? 4. Your Charles Schwab investment advisor outlines a variety of investment options, which she believes will offer a better return than the current money market fund. You can invest in any of the following choices, with corresponding current/past rates of return: a. A 5 year Certificate of Deposit yielding 3% APY.
Who stands to gain most if the development effort succeeds? Are Anacomp’s shareholders better off or worse off with this arrangement, relative to in-house development of the system? The agreement between Anacomp and RTS Associates involves Anacomp to develop the CIS system and RTS to pay a development fee. Upon completion of the development of the CIS system, Anacomp agreed to market CIS for five years on a commission basis, Anacomp also had the option to acquire all rights to the CIS system at the greater of its appraised fair market value or RTS’s investment plus a fixed profit. RTS had the right to extend Anacomp’s five-year marketing agreement an additional five years or to cancel it if Anacomp did not their best efforts to market CIS.
UBS regarded currency risk as a separate investment decision. Investment analysis was done on an excess return basis and as such, currency-hedging was a decision made after the investment analysis, based on the client's needs. What was the investment objective of UBS's global equity portfolio in terms of outperformance vs. the MSCI World Equity Index? How many stocks did this entail? The investment objective to UBS's global equity portfolio was to outperform the MSCI World Equity index by 225 basis points annually over the market cycle.
Financial Markets (N13302) Mock Paper (2010/2011) Question 1 (a) BSC Industries has just paid its annual dividend of $10 per share. The dividend is expected to grow at a constant rate of 5% indefinitely. The beta of BSC industries stock is 1.3, the risk-free rate is 2%, and the market risk premium is 7%. (1) What is the intrinsic value of the stock? (2) What would be your estimate of intrinsic value if you believed that the stock was riskier, with a beta of 1.7?
Customer Profitability and Customer Relationship Management at RBC Financial Group Case Assignment The first page of the case discusses Richard McLaughlin’s challenge to interpret the RBC customer profitability data and define an actionable strategy for managing the various market segments. Following are representative data for RBC Financial Group’s three major customer segments; Key, Growth, and Prime, described in the case. The first plot is customer lifetime value (CLTV) calculated over 5 years for different percentiles of customers. The second plot is customer value calculated just for the next one year for different percentiles of customers: This is the current customer profitability. The above calculations have been performed using the CLTV method described in the case.
Now by deducting the EBIT I can figure out the net earnings and adding the depreciation back I got the C.F. OP. Now I had to figure out the discount rate and did all this for five years so I could show the NPV and IRR. All these same steps were done for Corporation “B” to find out which company is worth acquiring. The net present value for company “A” was $29,425.85with a IRR of 6% while company “B” had a NPV of $12,656.03 with an IRR of 13%.