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.
Look at the results in Table 1. In general, what is the order of risk for the four risky asset classes? What happens to the reward-to-risk ratio for the different asset classes as the holding period increases? Is this pattern consistent with the change in the optimal allocations for Small Stocks as the holding period increases (shown in Table 2)? Explain.
The annual growth rate is I in the following equation: $1(1 + I)10 = $2. We can find I in the equation above as follows: Using a financial calculator input N = 10, PV = -1, PMT = 0, FV = 2, and I/YR = ? Solving for I/YR you obtain 7.18%. Viewed another way, if earnings had grown at the rate of 10% per year for 10 years, then EPS would have increased from $1.00 to $2.59, found as follows: Using a financial calculator, input N = 10, I/YR = 10, PV = -1, PMT = 0, and FV = ?. Solving for FV you obtain $2.59.
EQN.1 is the prediction of correlation of the dependent variable (stock price), and all the other independent variables, including earrings per share (eps), book value per share (bvps), cash flow per share (cfps), and income taxes. EQN.2 is the population regression line. EQN.3 is the sample regression line. Earning per share, or EPS, is calculated by total equity available to common divided by the numbers of share outstanding, and this indicator is mostly considered as the most important factor for determining the stock price. A higher EPS will increase the stock price in most of the cases .
Why is presentation as an extraordinary item on the income statement a positive choice for the company? • Because it will shows an increase in prior year profit • The Stock market will appreciate the continued growth in ongoing profitability and will discount the onetime loss • Also it would increase the company bonuses What are the negative consequences of presenting the item as extraordinary on the income statement? • The negative consequences are if the extraordinary item is if not fixed and it happen again then it will show double the loss and will affect bonuses and the company overall profit 3: List the stakeholders
Accelerated depreciation refers to any one of several methods by which a company, for 'financial accounting' and/or tax purposes, depreciates a fixed asset in such a way that the amount of depreciation taken each year is higher during the earlier years of an asset’s life. For financial accounting purposes, accelerated depreciation is generally used when an asset is expected to be much more productive during its early years, so that depreciation expense will more accurately represent how much of an asset’s usefulness is being used up each year. For tax purposes, accelerated depreciation provides a way of deferring corporate income taxes by reducing taxable income in current years, in exchange for increased taxable income in future years. This is a valuable tax incentive that encourages businesses to purchase new assets. 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.
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
A company issued a 30-year, $1,000 par value bond that has 10.85% coupon rate. Coupons are paid out semi-annually and the relevant interest rate is 9% compounded semiannually. a. (3 points) What was the value of this bond when it was issued? PMT = (.1085/2)*1000=54.25 N = 60 R = 0.09/2=0.045 (or 4.5 for calculator purposes) FV = 1000 PV =?
Chapter 1 Introduction to Macroeconomics T Multiple Choice Questions 1. The two major reasons for the tremendous growth in output in the U.S. economy over the last 125 years are (a) population growth and low inflation. (b) population growth and increased productivity. (c) low unemployment and low inflation. (d) low inflation and low trade deficits.
C) 5.14%. Question 12 - #93617 www.LotBook.net Question 13 - #95440 A) 5.6%. B) 6.1%. C) 5.8%. Time-weighted returns are used by the investment management industry because they: A) result in higher returns versus the money-weighted return calculation.