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 (email@example.com) 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
CCI would be taking a somewhat high risk by issuing additional stock due to the uncertainty about the offering price. Having a low P/E ratio with respect to the rest of the market, and the replacement cost of the firm being greater than its book value (argument 3), there is a good chance that the current stock price and the proposed offering Although long-term debt is a better financing choice a few of the drawbacks are pointed out. Debt holders claim profit before equity holders, so the chance that profits may be lower than expected, increases risk to equity may reduce or impede stock value. However, in extreme financial situations such as a recession period, CCI would still be able to increase its cash during a recession period with all debt capital structure. Also, there is a remaining 12.5 million that would have to be paid at the expiration of the bonds, but that could be paid off by issuing new bonds or additional equity at that time.
This method I believe is more accurate in maintaining financial records at the end of the year and providing a better financial look into how a company is managing. Cash accounting is when companies record revenue only when cash has been received. Cash accounting even if the service was rendered if no cash was received the company will not record the expense. By only recording expenses when bills are paid, the company may be able to shift expenses into other periods in order to make the company look more profitable simply by manipulating when payments are made. This can make the financial statements misleading.
When looking at earnings per share, we can see that between May 2003 and August 2004 they issued more shares, probably because of their expansion. It appears they took on too much debt and tried to expand too quickly, based on their increase in interest expense and increase in debt. Looking at the balance sheet, in 2004 there were no more short-term investments, they probably expect accounts receivable to increase with growth in sales. This is probably because KK began to get desperate and turned their investments into cash. Concerning that notes receivable from affiliates is significant in 2004, problems with associates being able to cover cost of equipment and supplies.
On the other hand MI backed mainly by shareholders equity and performing assets and thus would be able to issue new debt increasing value for both shareholders and the corporation. Thus the shareholders would gain at the expense of bond holders and the equity value of the company would increase. b) Bondholders Bondholders had a lot to lose as according to Project Chariot almost all the debt would be assigned to HM. Given the problems in real estate and hotel markets there was a concern of HM’s ability to meet its debt payment and there was a high probability of default. This meant that the risk was issued at investment grade but now was not backed by valuable assets of the companies which were to be spun off to MI which was to be backed by equity.
decline of bad loans, increased market values of good loans relative to amount of deposits. Increasingly higher interest rate risk – meaning that there is about 30% of excess interest sensitive assets compared to interest sensitive liabilities. SSB’s Major Strengths and Weaknesses in Terms of Profitability at Year-End 1993 According to the calculated ratios in Table-1, SSB had the following strengths and weaknesses. Strengths: Slightly increasing net interest margin (NIM): This indicates favorable control and management of interest income and interest expenses, in relation to SSB’s total assets. Increased earnings spread: This indicates that SSB has established effective borrowing and lending processes.
Answer: F 1-8 Because bank loans have a shorter maturity than most debt contracts, FIs typically exercise less monitoring power and control over the borrower. Answer: F 1-9 FIs typically provide secondary claims to household savers that have inferior liquidity than primary securities of corporations such as equity and bonds. Answer: F 1-10 Because the average maturity of assets and the average maturity of liabilities are often different on an FIs balance sheet, the FI is exposed to liquidity risk. Answer: F 1-11 When an FI functions as a broker, they are selling a financial asset that they have created and will continue to hold on their balance sheet. 1-1 Chapter 01 - Why Are Financial Institutions Special?
The GDP value would then decrease, due to the move from Point A to C, and increase employment which would decrease savings. In addition, there is an inverse relationship to both bond prices and interest rates because as one increase in value, the other decreases, and vice versa. 2. IS-LM Model--Suppose that you have the following equations for the IS-LM model. The following are the equations of the IS-LM model, here including a feature that taxes are not simply given but depend on income through a tax function, T(Y).
2010) is provided below. 1167872 4 Despite the leading position and the good business results, SWOT shows several sources of potential risks for UST. The company is losing market share against new price-value competitors because of slow innovation and late product introduction and extensions. Historically, UST relied on his leading market position boosting earnings with annual prices increases. But in the meanwhile smaller competitors started to quickly erode market share with prices cut.
It needs a higher minimum balance to be maintained as compared to the savings account. Penalty is charged if minimum balance is not maintained in the current account, it charges interest on the short-term funds borrowed from the bank. It is of a continuing nature as there is no fixed period to hold a current account, it does not promote saving habits with its account holders. Banker requires KYC (Know your Customers) norms to be completed before opening a current account. The main objective of current bank account is to enable the businessmen to conduct their business transactions smoothly.