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2 a. Financing requirements Debt repayments Capital expenditures Working capital b. risks associated with polaroid's business and strategy Business risks - Business risk refers to the degree to which the company lacks the capability to manufacture and sell a product to present or new markets. It also includes the question of whether there is sufficient customer demand for the product under consideration. Competitive risks - Competitive risk refers to whether the present competition will retaliate against any moves being made or contemplated by the company and, equally important, the likely intensity of this retaliation.
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The second approach is based on the price-to-earnings ratio of the company and its reciprocal, the earnings yield. The expected total return on stocks (%) is estimated to be the earnings yield. However, the two approaches produce highly different results and Jamil Baz is in the tough situation of deciding whether or not he should emphasize one of these approaches during the client meeting or, otherwise, explain the apparent differences between their results. Analysis Model Details and Assumptions The Gordon Growth Model uses the current average dividend payout ratio of the entire stock market as a starting point to calculate the ERP.
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MSDI_Case_Solution. Compute the net present value of the photoelectric inspection equipment in (a) pesetas, by discounting peseta cash flows at a peseta discount rate; and b) dollars, by translating future peseta cash flows into dollars at expected future
pesetas, by discounting peseta cash flows at a peseta discount rate; and b) dollars, by translating future peseta cash flows into dollars at expected future spot exchange rates. Merck's dollar hurdle rate for a project of this type was 13 percent. Assume that at the time of the analysis, annual inflation was expected to be 8 percent in Spain and 4 percent in the United States. Answer: The attached excel has the calculations pertaining to the NPV of the new machine. In the first alternative, we find out the WACC of the company in Spain by using the following formula: WACCMERCK-SPAIN =[(1+ WACCUSA )* (1+ INFLATION RATESPAIN )/ (1+ INFLATION RATEUSA )]-1 Then using this as the hurdle rate, we discount the cash flows to find the NPV in pesetas.
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Blaine_Kitchenware_Case. Do you believe Blaines current capital structure and layout policies are appropriate?
Approximately 85% of Blaine's revenue and 80% of its operating income came from the sale of mid-tier products. Blaine's 2006 EBITDA margin of nearly 22% was among the strongest within the peer group. Blaine's operating margins had decreased slightly over the last three years. Margins declined due to integration costs and inventory write-downs associated with recent acquisitions. Now that the integration activities were completed, BKI executives the firm to achieve operating margins as high as it historical margins. Most of the Blaine's rivals were cutting prices to maintain growth but Blaine did not follow suit and as a result its core products lost its market share.
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Real time gross settlement (RTGS) was introduced in Australia in 1998. Wire a report that analyses the impact of RTGS on the efficiency of Australias payment system and compares RTGS with the settlement process used for non-cash retail size transa
Prior to June 22nd 1998, in Australia almost all non-cashed transactions were settled. Under this settlement process, despite the size of the transactions, non-cashed transactions were all batched together and the net positions would be settled at 9AM the next business day through the ES accounts of involved banks or other institutes accordingly (Reserve Bank of Australia 2004). With huge number of participants and enormous total value of transactions each day, the settlement risk would be very likely to occur.
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ECONOMIC ANALYSIS ON FINANCIAL CRISIS. In September 2007, the global economic crisis started to show its effects. Around the world stock markets have collapsed, and the real estate crashed. In the meantime, governments had to rescue their financial system
Keynes felt that the Classical economists did not conform to the reality and needed to be "corrected". (Patil, N.D)Therefore, The General Theory of Employment, Interest and Money was published and it supported the theory of Keynes that unemployment could be set at rest by government. He also contended governments can stimulate economic activity by rising public spending and lower taxation. In this paper, Classical and Keynesian theory will be contrast and analyze first and the Keynesian 45�line model diagrams will be explained combining with recently economic crisis in detail. In the end, a large number of researches of fiscal policies by British government will be analyzed combining with the economic situation in UK.
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The American Dollar Crisis. An article, Forty Years of Hurt posted in the online version of The Economist on May 4th, 2011 states that the dollar has never experienced so low values.
Although a weak currency means that American goods will be generally cheaper abroad, thus exports will increase, America has a serious problem with the trade deficit it's running. Moreover, creditors are getting nervous with their holding of low-yielding Tresury bonds in a depreciating currency. Looking at this graph it is really normal to start thinking about the issues that economists are discussing nowadays and about the possible signs that a dollar might collapse. Generally speaking, a dollar collapse means that that the value of the dollar falls so rapidly, that everybody who owns such a currency starts to sell it out, no matter of the cost.
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-----by running an enterprise in a foreign country. Furthermore, according to Neuhaus (2006), FDI particularly involves setting up some physical entities such as a factory or an enterprise in a foreign country. In contrast, what I state about FPI is that it is usually calculated to achieve short-term realization of goals, and rendering the investor benefits from foreign countries through two indirect ways - investing in financial markets (e.g. stocks, bonds, or other financial assets) and corporate participation but without the power to make decisions.
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In the first part, I discuss the implication of domestic and foreign funds and why they have different stock preferences. In second part, the preference of both domestic and foreign investors from same market will be discussed and compared. Afterwards, the conclusion and any further applications will be presented in the last section. Mata, Portugal (2002) Classify funds into domestic and foreign funds. How to distinguish the domestic funds and foreign funds is to look at the located country of these funds.
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Credit Scores: Should Lenders Judge by the Number?The first reason why credit scores should be used as a fair measure to help lenders estimate potential risk is that credit scores are determined who is better qualified for a loan, and it also has a huge i
qualified for a loan, and it also has a huge impact on not only the lifestyles of individuals but the economy of the country as well. A young adult heard that a bad credit score could keep him from getting a job. He wanted to verify whether this is true and he wanted to know where he could find out about his credit rating. It is very true that having a negative credit score can affect a person's ability to get a job.
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UST is a smokeless tobacco company .What are the primary business risks associated with UST Inc.? What are the attributes of UST Inc.? Evaluate from the viewpoint of a bondholder.
As exhibit 2 shows, the total market share of UST decreased from 86.2% in 1991 to 77.2% in 1998. The company's price value market share almost maintain at zero before 1998. However, the percent of price value market share keep increasing these years at the speed of 40.5% per year. This trend shows the signal that the market share is shifting from premium market to price value market. The overall moist smokeless tobacco market is expected to continue to grow at an annual rate of 1-3%, with a large portion of the growth expected in the price-value segment. UST give the smaller players the chance of eroding the market share by cutting the price.
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For Charlton Bates, the president of BatesManor Funiture, there is a two part problem in regards to budgeting for the upcoming year. First, it must be determined how much should be budgeted for overall promotion. Second, it must then be determined exact
This industry is broken down into 3 categories, these are upholstered, wood, and other. These 3 categories make up 50%, 40%, and 10 % of sales, respectively. Therefore, $12.4 Billion were the sales in 2007 for wood furniture, the specific market in which BatesManor operates (Figure 8). This market is growing with documented sales growth of 2.5% in 2007 and anticipated growth of 4% for 2008. This would result in $12.896 Billion being spent on wood furniture over the next year. For BM to achieve a 4% increase in sales, they would then have to capture 0.6% of the overall wood furniture market (less than 1%).
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Preparing Financial Forecasts. This report is for management of Tricol plc, and the report should take consideration of discuss the possible reasons for variances, which should include recommendations and flex the budget figures, as well as calculate the
108,600 4,400 A 2.0 Calculate the Variances 2.1 Direct Material Total Variance = (stanard units of actual production * standard price)-(actual quantity * actual price) = 4kg/unit*�10/kg*1,600units-�61,600 = �2,400 F The rate for direct material total variances is �2,400/ �64,000 * 100%= 3.75% 2.2 Direct Material Usage Variance = standard price*(standard units of actual production-actual units) = �10/kg*(4kg/unit*1,600units-5,600kg) = �10*(6,400kg-5,600kg) = �8,000 F The rate for direct material usage variances is 12.5% 2.3 Direct Material Price Variance = actual quantity*(standard price-actual price = 5,600kg*[�10/kg-(�61,600kg/5,600kg)] = 5,600kg*(�10/kg-�11/kg)
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Business Risk & Financial Risk. Report on the assessment between business risk and financial risk and the relationship between the nature of business and the level of gearing.
Ordinary shareholders will probably expect higher return from their shares to compensate for a higher financial risk.  The assets of a business must be financed somehow, and when a business is growing, the additional assets must be financed by additional capital. Nevertheless, the higher the debt, the higher the financial risk. 2.0 Assessment of business risk and financial risk 2.1 Business risk In order to assess business risk, we may use the ratio analysis to find out. If there is a high percentage of operating gearing, then the company is exposed to a relatively high degree of business risk.
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Advanced Corporate Finance Case: Galveston Fishing Company. Based on calculations we recommend Galveston should enter the shrimp processing business. The project generates a positive NPV of its investment.
0.42 0.83 Beta of Company (levered)(target) 0.60 1.12 1- Tax Rate 65% 65% Total Debt 5,171 10,600 Equity 5,105 11,530 Debt/Equity 1.013 0.919 Debt/Value 0.503 0.479 [1+ (1-T)*D/E] 1.658 1.598 Target D/E = 0.3/0.7 0.429 0.429 Target [1 + (1-T)*D/E] 1.279 1.279 Beta of Company (unlevered) 0.254624603 0.521804184 Average Industry unlevered Beta 0.388214393 0.388214393 2. Estimate the required rate of return on assets (required rate of return of unlevered equity) for the shrimp processing business. rf 7% 7% rm-rf 8% 8% ra = rf +B(U)*(rm-rf)
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Executive Summary Advanced Medical Corporation is experiencing significant growth; however, large expenditures in R&D and poor inventory and accounts receivables management process have resulted in negative earnings. By reducing the companys spending,
There are few aspects of the current operations AMT employs which are undeniably the key factors to its unprofitability. Concentrating on market share by spending tremendous amounts of capital on R&D and SG&A does not prove to be beneficial at this time. Analysis To understand how AMT's increasing growth is continuing to result in negative net earnings a chart has been created to examine the company's current expenditures. As seen in Figure 1, the analysis reveals that in 1984 AMT's sales increased by 64%. The rapid growth is the result of significant increase in SG&A and R&D expenses. However, inadequate inventory management resulted in a decreasing inventory turnover ratio.
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The Time Value of Money. Financial managers use time value of money techniques when assessing the value of the expected cash flow streams associated with decision alternatives. Alternatives can be assessed either compounding to find future value or discou
The future value technique uses compounding to find the future value of each cash flow at the end of the investment's life and then sums those values to find the investment's future value. Alternatively, the present value technique uses discounting to find the present value of each cash flow at time zero and then sums these values to find the investment's value today. Future Value of a Single Amount Compound interest is the amount of interest earned on a given deposit has become part of the principal at the end of a specified period.
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Many types of governances had been put in place before the Sarbanes-Oxley Act. The National Commission of Financial Fraudulent Reporting, the Commission of Sponsoring Organizations (COSO), the American Accounting Association (AAA), the American Institute of Certified Public Accountants (AICPA), Financial Executives International (FEI), the Institute of Internal Auditors (IIA), and the National Association of Accountants were all created in an effort to encourage accurate financial reporting (History, 2009). Although all of these organizations were in place in the 1980's, corporate scandal still prevailed; as was evident in 2001 with Enron and WorldCom.
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Why would it be useful for international traders to build up knowledge of the global distribution of income and wealth and how it is changing over time?
To operate internationally it's important to have knowledge of globalization and have general knowledge of business, government and societies. Globalization it is a process between different figures and factors that includes people, organizations, money and different forms of data that are free to access around the world. Globalization had an innovation impact on people lives and new opportunities are available along with the risks. With global distribution you have to consider control, competition and cooperation. Globalization has in a way encouraged the international transport as a result the economic integration has developed and expanded. For International traders it is important to gain knowledge about the economic variables of the regions and countries over the world.
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Report of Thornton Plc. The Excel model using for forecasting shareholder value are considered as a helpful application in financial analysis now. The prediction shareholder value was replied on Alfred Rappaports seven value drivers which are known as
Methodology In simple terms, the Excel model will work out the value of Thorntons Plc today, based on prediction of how much free cash flow it is going to make in the future. The forecasting of free cash flows will be practice during the future five years (from March 2011 to March 2015). The all ratios and numbers predicted are given basing on the historical figures. And the assumption will be given that the ratios are constant. 3. The forecast period and interpretation data The value drivers are considered as the crucial factors affecting to the shareholder value including
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Financial Management. There are several theories that have been applied, in order to help, if not find the best capital structure of a company.
By definition, debt is the amount borrowed from external sources such as individuals, banks, or other financial institutions whereas equity is the ownership interest in a firm including equity share capital, different kinds of shares and capital profits amongst other equities. However, the proportion of which debt and equity in the capital structure is allocated, differs from one company to another. The capital structure also varies according to the industry and the market situation that the company is operating in.
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Maybe it sounds complicated but actually it is really simple stuff. All you have to do is participate in our discussion and I promise you will hear all the answers! Insurance as a risk transfer mechanism Please rise the hands who have previously used a mobile phone? Great! So imagine you have brought a brand new mobile phone costing �300. We all know that if we want our new purchase to look nice and work properly we have to take care of it.
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The main page also provides brief live data on exchange and interest rates, but this is not in English and, therefore, not quite useful. Banco Central do Brazil has a page for legislation and norms, but it is not quite detailed and sometimes not fully translated in English. The site also provides visitors with the information and statistical data on Brazilian economy, financial and banking systems (interest and exchange rates, money supply, etc.). All data can be downloaded as Excel sheets, and, therefore, can be easily used in any type of economical-statistical analysis.
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The main categories of derivatives are forwards and options, however many variations and combinations have been devised to suit the needs of investors. Some of them are futures and forward contracts, options, swaps, swaptions etc. Forward contracts are agreements between two parties to trade an asset on a future date at a price specified today. Both parties incur the obligation to deliver what has been agreed on in the contract. Standardised forward contracts that are traded on exchanges are called futures.
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Typically, there will be trade-off between fixed costs and variable cost and the company analyses the breakeven drivers to determine which would provide the best options Solution to Minicase- Jen and Larry's Yogurt Company A Number of units to be sold is 400,000 to reach the expected revenue of $1.2million B 2009 Number of units sold 400,000 Revenue $ 1,200,000 Cost of goods sold $ 600,000 Gross Profit $ 600,000 - Administrative expense $ 180,000 -Marketing expense $ 200,000 -Interest exp $ 15,000 EBDAT $ 205,000 EBDAT as percentage of Revenues 17.08% C 2009 Revenue $ 1,200,000 Cost of goods sold (50% of Revenue)
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