Free cash flow In corporate finance‚ free cash flow (FCF) is cash flow available for distribution among all the securities holders of an organization. They include equity holders‚ debt holders‚ preferred stock holders‚ convertible security holders‚ and so on. G. Bennett Stewart - the "economic model of value holds that share prices are determined by just two things: the cash to be generated over the lifetime of a business and the risk of the cash receipts”. GSB (1990)‚ “The Quest for Value”
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evening before discussion Be prepared to discuss the case in class (your answers‚ your analysis‚ etc.) 1 Valuation - Use NPV approach How to make investment decisions: 1. Estimate (expected) cash flows in each time period 2. Choose an appropriate discount rate 3. Use discounted cash flow analysis to calculate NPV 4. Make decision that maximizes NPV Fundamental principle: V(A+B)>V(A)+V(B) Value driver:1)Eliminate overhead 3) Leveragen brom dname Pay its=D(P)(P-VC)-FC V(Pinkerton after)+V(CPP
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purpose of this financial analysis is to compare Tootsie Roll and Hershey Inc to the industry average financial ratios to determine which company will be the best investment opportunity. This analysis will evaluate and compare the company’s liquidity‚ solvency and profitability ratios from 2004. Tootsie Roll‚ Inc. and Hershey Inc are both companies well known for the selling of confectionary goods. Hershey is publicly traded under NYSE: HSY‚ Tootsie Roll under NYSE: TR. Both are listed under SIC
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in the same industry‚ but it doesn’t tell you whether it’s a good stock to buy or what the market thinks of it. For that information‚ we need to look at some ratios. http://stocks.about.com/od/evaluatingstocks/a/eps1.htm Hershey In order to analyze EPS for Hershey it is necessary to look at historical data. Using the EPS as listed at www.ih.advfn.com we get the following 5 years of EPS information: 2004 – 2.38‚ 2005 – 2.07‚ 2006 – 2.44‚ 2007 - .96‚ 2008 – 1.41 From this we can state that
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CONSTRUCTION OF FREE CASH FLOWS A PEDAGOGICAL NOTE. PART I Ignacio Vélez-Pareja ivelez@javeriana.edu.co Department of Management Universidad Javeriana Bogotá‚ Colombia Working Paper N 5 First version: 5-Nov-99 This version: January 2001 This paper can be downloaded from the Social Science Research Network Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=196588 CONSTRUCTION OF FREE CASH FLOWS
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to Note on Sample Cash Flow Template. Question 1 (5 points) The project with the highest IRR is always the project with the highest NPV. Your Answer | | Score | Explanation | True | | | | False | ✔ | 5.00 | Correct. Try now to sort this out in different contexts‚ | Total | | 5.00 / 5.00 | | Question Explanation This is all about the fundamental difference between IRR and NPV. Question 2 (10 points) Ann Arbor is considering offering public bus service for free. Setting up the
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purchasing a smaller chain‚ South Georgia Parts (SGP). Brau’s analysts project that the merger will result in the following incremental free cash flows‚ tax shields‚ and horizon values: Years 1 2 3 4 Free cash flow $1 $3 $3 $7 Unlevered horizon value 75 Tax shield 1 1 2 3 Horizon value of tax shield 32 Assume that all cash flows occur at the end of the year. SGP is currently financed with 30% debt at a rate of 10%. The acquisition would be made immediately‚ and
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finance the purchase with Financing Alternative #1 (debt and equity financing from an investment firm) or Alternative #2 (all debt financing from a bank). The financing alternatives are discussed on page 4 of the case. You should do the discounted cash flow valuation of the deal using Adjusted Present Value. The question is “What is Pinkerton worth to CPP (Wathen’s sole proprietorship)?” The value of Pinkerton to CPP is made up of three parts: 1. the value of Pinkerton as a stand-alone firm (but
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Introduction Butler Capital Partners (Butler) is an investment fund founded in 1990. Butler closed its first private equity fund‚ European Strategic Fund‚ in 1991. This first fund was mainly focusing on small family owned enterprises and on divisions of larger companies. Mainly of his first success he closed in 1998 his second fund‚ Private Equity II‚ and Butler became one of the largest independent funds in France. With his second fund he would focus on investments in France on a larger scale
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Heshery Foods versus Tootsie Rolls Financial Comparison A comparison of 2004 Hershey’s and Tootsie Roll‚ questions needed to determine which company is better off: Are the company’s operations profitable? To consider this I will be looking at the Income Statement. If the company’s revenue exceeds its expenses it will report net income or will report a net loss. This will report on the success or failure of the company’s operation by reporting its revenue and expenses. Hershey Foods reports a net
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