The recent corporate strategy of BP was Diversification, the launch of Stockbridge of internal public securities investment fund. The investment strategy Stockbridge is: * Publicly traded securities in 10-20 U.S. firms * Period: 3-5 years * Not deep value investors * Not high value, short term * Why does BP’s corporate strategy lead to superior returns? Because Berkshire’s investment process was hightly selective. They only selected less than 60 out of thousand investment opportunities, performed extensive industry and company due diligence process to select the good company. * What is their portfolio?
These two segments are fundamentally different and do not have the same risks. By using a company wide hurdle rate the risks of these two segments are not taken into account. Looking at industry wide equity betas we can see that telecommunications services industries are less risky at an average of 1.04 while telecommunications equipment and computer equipment industries are riskier and have an average beta of 1.36. Investors should ask for a much higher return from the Products and Systems segment than from the Telecommunications segment. To calculate the separate hurdle rates the cost of equity for each segment must be determined first.
If markets for Apogee's goods and services exist in multiple locations, having one office hardly makes sense. Multiple offices should be opened to increase profit. The author could do a couple of things to make this argument stronger. For example, there is no evidence that shows the profitability of all the field offices is declining. There is also no evidence that shows the marketability of the field offices.
As stated earlier, we offered to pay $5.1 billion for the equity portion of the company. However, since it will take 12 to 18 months for the deal to close we must find the present value of our offer. When we discount our offer over 12 to 18 months, we can determine that the present value of the offer is $4.7 billion (Also see Exhibit 1). If we compare this to the implied market value of the equity, we can see that our offer is right in line with the value of the equity. As you can see, while we are paying right at the high end implied value for the firm, we are not overpaying for the company.
I did not have information as to whether or not they could get more Japanese debt so cheaply, and the fact that their cost of debt under Joanna is less than the risk free rate does not make any sense. I took Nike’s current bond information on the market (N=50, PV=-956, PMT=67.5/2, FV=1000) you get an I/Y of 3.56*2=7.13%. That is the cost to issue new debt for Nike based on current market conditions. Should be 40 periods; -2 For the cost of equity Joanna did a better job. A mutual fund trying to get returns off of value based, large cap stocks will probably hold the stock for quite some time.
This analysis also details how much money is being wasted under Sippican’s current system. For example, none of the activities listed are being used at 100% capacity, meaning that a percentage of the dollars being attributed to any given activity are being attributed in excess. Sippican could reduce their own costs by only paying for resources consumed, rather than using a more general overhead allocation system. Recommendations Based on revised cost and profitability estimates, Sippican’s management team should first consider implementing a time-driven activity-based costing system. Such a system will provide clearer insight into where direct labor and machine hours are really going, making it easier to better allocate machine and labor time wherever needed.
d. How should Lani report the lease transaction on its December 31, 2006, balance sheet? The reports should fall under Lani’s December 31, 2006 balance sheet which displays non current and should be noted separately. The capital ease should be listed under the capital lease on December 31, 2006. Case 13-5 Lease Classifications a. What criteria must be met by the lease in order that Doherty Company classify it as a capital lease?
The company’s proforma statements did not take into account any external factors such as a retail recession taking place. The amount of money invested in inventory is almost double what was forecasted for the nine-month period. Profit margin was only 10%, which was much lower than the forecasted 15-30%. By October of 1995 it should have been obvious to SureCut Shears that sales were not keeping up with what was forecasted causing inventory to build up. Conclusion: If Fischer wants to be able to repay his loan he needs to be more accurate
Usually a discount of 10 percent to 40 percent is applied to private companies due to the lack of liquidity of their shares. Precedents/acquisition comps: At what metrics (same as above) were similar companies acquired? Discounted cash flow (“DCF”): Based on the concept that value of the company equals the cash flows the company can produce in the future. An appropriate discount rate is used to calculate a net present value of projected cash flows. Leveraged Buyout (“LBO”): Assuming an IRR (usually 20 percent to 30 percent), what would a financial buyer be willing to pay?
The Financial Accounting Standard Board Statement No. 5, Accounting for Contingencies, states a contingency as an existing condition, situation, or circumstances, in which the company can gain or loss when one or more future events occur or not occur. The FASB Statement No. 5 defines two types of contingencies—gain contingencies and loss contingencies. The company requires determination of the likelihood of loss to recording loss contingencies.