Marriott estimates its equity beta to be 1.11. Based on this information, if Marriott had no debt in their capital structure, I believe their equity beta would be lower, more in line with the S&P 500, because adding debt to a firm increases leverage in their operations. If a firm has more leverage, they have more room to take risks and this reflects a higher beta, which in turn leads to greater returns. This series of events is one of the main factors as to what lead to the immense growth of Marriott throughout the 1980’s. Note: I am not
(Select the best answer.) (Points : 1) Answer: The value of an investment opportunity you pass up in order to take another investment opportunity 4. What is a volatile investment? (Select the best answer.) (Points : 1) Answer: An investment that can change quickly without warning 5.
I would make an investment in the company’s 5% convertible bonds. Sepracor’s ROA and ROE is above the average and showing that it is profitable; however, the company’s debt to asset ratio is above 1, which means that most of its assets are financed through debt instead of equity. Sepracor would be in trouble if its creditors were to start demanding repayment. C.) To make valid comparisons between Sepracor and Bayer, you would have to compare the rules for fair value under the U.S GAAP and iGAAP. Under IFRS, convertible bonds are separately recorded as liabilities and stockholder’s equities.
The stock valuation model, P0 = D1/ (i - g), can be used for firms which have negative growth rates. 4. Company J and Company K each recently reported the same earnings per share (EPS). Company J’s stock, however, trades at a higher price. Which of the following statements is most correct?
Quote number one has a premium of 150% of actual losses and a minimum and maximum of $5 and $12 per 1,000 insured, while policy two has a premium of 100% of actual losses and a minimum and maximum of $6 and $9 per 1,000 insured. After examining the results from the simulation model, and looking at numbers as well as graphs, from the two quotes, quote number two is more appropriated for the company. Background Recognizing the complexity of the industry and the imperative need to offer the best service at the lowest possible cost, it is important to do a comprehensive study to come up with the best alternative that suits the company’s needs. To remain profitable in this dynamic economy, it is necessary to be cost-effective and eliminate all the unnecessary expenses but at the same time protecting the company’s assets to the maximum extent possible. Therefore it is fundamental that the company acquire an insurance policy with enough coverage for partial hull damages and total hull losses that doesn’t boost overall costs unjustifiably.
Although the broker option is a viable investment with positive returns, as shown on Table 2, the NPV is not as favorable compared to option 1. The profit index for the broker option calculates to 2.84 compared to 3.34 for the high-tech option. This means that for every dollar invested Guillermo returns this percentage based on the initial investment and the current cash inflows per
Their price-to-earnings ratio is also below investor’s expectation in comparison to the company’s risk. With nearly $2 billion being invested in upcoming capital projects, the discount rate(s) to be used within the firm needs to be more accurate, account for risk, and not destroy shareholder’s value. Introduction Teletech Corporation is divided into two main segments; Telecommunications Services and Products & Systems. Forward-looking, the firm will invest nearly $2 billion into projects. Brief Statement The constant hurdle rate has been taking some heat from investors and has been addressed by Victor Yossarian.
If IRR is larger than WACC, the project is considered to be profitable. Nevertheless, IRR is not the only indicator for investment evaluation; other factors are needed to be considered to come up with the final solution. 2. The Gopher Place (GP) vs. Whalen Court (WC) All the information for the analysis is derived from the Exhibit 1. on the next page. (In thousands except %) Gopher Place Whalen Court IRR 12.3% 9.8% NPV $16,755 $25,875 Initial Investment $23,016 $119,263 Hurdle Sales to Meet IRR 2.2% 31.2% Sensitivity of IRR with 10% (decline)increase in sales
The report concludes with a critical assessment of Buffet’s investment philosophies, looking at the impact it has on Berkshire Hathaway and why it is difficult for other investors to replicate Buffet’s strategy and be as successful. The findings indicate that the market reacted positively to the deal, especially for Berkshire Hathaway, beating the average response to an acquisition being announced by over 4%. The increase in Berkshire’s value represents the stock markets opinion on how much they underpaid. Using the enterprise value multiples method, the report finds that the book value of Pacificorp to be $9.2bn, $200m less than the offer value. This implies there is significant intrinsic value when combined with MidAmerican, the new customer base and economies of scale being the 2 most important factors.
The value to the separate transitions would be higher than a combined one. Being the value of the disk drive business diluted in the Veritas stock value, a separation based deal would trigger a valuation of the Veritas business close to its stock price value, plus a higher price for the disk drive business. Finally Silver Lake Partners’ aims to acquire the disk drive operations and probably are not interested in the Veritas stock, that is a very close exchange of money for stock. Transaction Winners and Losers: Main winners would be Seagate shareholders. Will avoid taxes on the Veritas stock swap and acquire a more liquid asset.