$5‚904 to $5‚678 billion C) PacifiCorp’s bid of $5.1 billion in cash and 4.3 billion in liabilities and preferred stock equals $9.4 billion which is out of range for the ranges written in question 2 above. $9.4 billion is higher than $9‚289 billion. This means that Warren must think the intrinsic value of the company is higher than what the market value and book value. The present value is based of the Discounted Cash Flows model which is $4.76 billion. D) E) Warren Buffett’s perspective
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general knowledge‚ where would the various estimators be appropriate? Where would they be inappropriate? (Simon’s second task) Regarding the cash flow forecasts in case Exhibit 5‚ at what point in the future would you set the forecast horizon for the three investments? Why? More generally‚ what should determine when you stop forecasting annual cash flows and estimate a terminal value? Estimate other terminal values based on alternate estimation approaches. From these various estimates‚ please triangulate
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Aim of the report The aim of the report is to use different valuation techniques to see if the current share price of Tesco plc is fair‚ undervalued or overvalued. Some of the findings will be compared with other firms in the same industries and share holders will be informed on whether they should buy‚ hold or sell. Background information on Tesco Tesco is the largest supermarket retail chain in the United Kingdom with Sainsbury being their closest rival. It is also the third largest retail
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(Points : 5) Evaluation of alternatives Coding Training Maintenance Question 3. 3. (TCO C) Mini Corp. acquires a patent from Maxi Co. in exchange for 2‚500 shares of Mini Corp.’s $5 par value common stock and $75‚000 cash. When the patent was initially issued to Maxi Co.‚ Mini Corp.’s stock was selling at $7.50 per share. When Mini Corp. acquired the patent‚ its stock was selling for $9 a share. Mini Corp. should record the patent at what amount? (Points : 5)
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Introduction Cooper Industries was unsuccessful in acquisitions until it established a basic criteria for future acquisitions. That new criteria worked well‚ and when they went to acquire their fourth company since implementing their strategy‚ they faced fierce competition. They have to decide whether or not to pursue this company of interest‚ and then make an offer that will be selected over the others. Background Facts Cooper Industries is a manufacturer of heavy machinery. They began
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• Internal rate of return • Modified internal rate of return • Equivalent annuity Here in our case‚ we have used Net Present Value or NPV‚ which is estimating the size and timing of all the incremental cash flows from the project. These future cash flows are then discounted to determine their present value. These present values are then summed‚ to get the NPV. The NPV decision rule is to accept all positive NPV projects in an unconstrained environment‚ or if projects are mutually exclusive
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simply taking a look at the balance sheet and income statement and figuring out what’s total assets and total liabilities. A discounted cash flow analysis is one of the main ways investors can value a company. The idea of the actual valuation is to project future cash flows and discount them to see what would be their present value 10 years from now‚ for example. These cash flows then affect the stock price which an investor would compare to the current stock price to see if the company is undervalued
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compute the net present value of the proposal to sell the existing equipment and buy the laser printer‚ discounted at an annual rate of 15 percent. In your computation‚ make the following assumptions regarding the timing of cash flows: 1.The purchase price of the laser printer will be paid in cash immediately 2. The $200‚000 sales price of the existing equipment will be received in cash immediately 3. The income tax benefit from selling the equipment will be realized one year from today
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as a whole has historically traded at a price-to-earnings multiple in the mid-to-high teens. Simple math shows today’s stock prices reflect expectations for value-creating earnings and cash flows many years in the future. The mismatch between a short forecast horizon and asset prices that reflect long-term cash flows leads to the second problem: investors have to compensate for the undersized horizon by adding value elsewhere in the model. The prime candidate for the value dump is the continuing‚
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(15-20 minutes) 1.Paul Simon Company(a)1/1/04Cash 200‚000 Bonds Payable 200‚000(b)7/1/04Bond Interest Expense 4‚500 (200‚000 X 9 X 3/12) Cash 4‚500(c)12/31/04Bond Interest Expense 4‚500 Interest Payable 4‚500 2.Graceland Company(a)6/1/04Cash 105‚000 Bonds Payable 100‚000 Bond Interest Expense 5‚000 (100‚000 X 12 X 5/12)(b)7/1/04Bond Interest Expense 6‚000 Cash 6‚000 (100‚000 X 12 X 6/12)(c)12/31/04Bond Interest Expense 6‚000
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