d) minimize operational costs and maximize firm efficiency. e) maintain steady growth in both sales and net earnings. 4. Accounting concepts for a firm to create value it must: a) have a greater cash inflow from its stockholders than its outflow to them. b) create more cash flow than it uses.
a.What is Alcatel-Lucent’s WACC?  b. If Alcatel-Lucent maintains a constant debt-equity ratio, what is the value of a project with average risk and the following expected free cash flows? (Using the WACC method)  Given a cost of 100 to initiate, the project’s NPV is 185.86 – 100 = 85.86. c. If Alcatel-Lucent maintains its debt-equity ratio, what is the debt capacity of the project in part b? The project’s debt capacity is equal to d times the levered value of its remaining cash flows at each date.
The way this relates to Keynesian economics: (the theory of the total spending of the economy) is due to its impact of increase in government spending in short run and long run. According to the U.S, Bureau of Economic Analysis: * What is the largest component of GDP? Consumption. (Household consumption) “Consumption is calculated by adding durable and non-durable goods and services expenditures. It is unaffected by the estimated value of imported goods.”(quickmba) * What is the smallest component of GDP?
* Net profit percentage – This calculation takes the idea of profitability one stage further by actually considering the profit as a percentage of turnover after all the other expenses have been taken out. Looks something like this: Net profit x100 = net profit percentage Turnover * Return of capital employed – This calculation is worked out by considering the net profit as a percentage of the capital employed by that business. The reason this ratio is useful because it shows the amount of money an investor is receiving back on their capital as a percentage. This means they can
True b. False 6(9-7) Free cash flows and valuation F G Answer: a EASY [vi]. Projected free cash flows should be discounted at the firm's weighted average cost of capital to find the value of its operations. a. True b.
Under acquisition accounting, the $2.55 billion increase in market value of Berkshire Hathaway is the increase in goodwill of the company. Berkshire Hathaway’s increase in share price also reflects the understanding that this deal was a good long-term investment, the type of deal that investors and Warren Buffet had apparently been awaiting since 2004. Specifically the $ 2.55 billion increase reflects the markets belief in future synergy effect of this acquisition. Q 2. As a privately owned company, PacifiCorp’ market value cannot be determined by share price, rather it is a reflection of the book value, intrinsic value and expected future earnings for the owners.
The practice of business valuation The first method of business valuation, discounted cash flow (the "DCF"), is based on the idea that the economic value of the asset is equal to the amount of future cash flow Company updated to reflect its risk. The discount rate used is the weighted average cost of capital. Is calculated as follows: • cash flows discounted at the explicit forecast horizon (visibility of the company); • the terminal value from estimating a growth rate to infinity; • the value of equity is the difference between the asset value and the resulting economic value of the bank debt and net financial and possibly other elements. The second evaluation method, the method of multiple analog approach is compared with other companies in the same sector. In this approach, the economic value of the assets of a company is the result of a multiple of its earnings: operating profit multiple or multiple of EBITDA.
Financial Ratio Analysis of Dr. Pepper Snapple Group Liquidity ratios for a company help whomever is analyzing the data determine the company’s liquidity. When a company has good liquidity they are able to pay off their short term debt without having to take out any additional financing. We will look at Dr. Pepper Snapple Group’s current ratio for 2009 and 2010. The current ratio is calculated by taking the company’s current assets and dividing it by the current liabilities. It shows how many times the current assets can cover the current liabilities.
First, payments on debt interest are tax deductible but payments on equity are not. Second, equity allows shareholders to share the company profits. With that, equity holders now also hold stake in AMSC and share control. Comparatively, debt financiers have little or no impact on control of the company; assuming payments are being made. Profits are also used to pay the debt, however, so how this weighs out as a disadvantage would clearly depends on how well or not
Legalizing immigrants would be a stimulus to the United States’ economy because legalized workers contribute to the economy through taxes. a. For the past decade, more than two thirds of these undocumented and illegal immigrants have contributed to the United States’ financial system and society (Fitz, 2011). b. Immigrants’ involvement in the workforces has engaged a key function in lengthening the ability to pay all just debts of the Social Security Trust Fund (Fitz et al., 2013). c. If the reform is passed for these immigrants, it will add major economic growth, earnings, tax revenues, and jobs (Lynch et al., 2013).