Watzon and Head (2007) described the following as implications of high gearing: Increased volatility of equity returns: the higher a company’s level of gearing‚ the more sensitive its profitability and earnings are to changes in interest rates. The company’s profit and distributable earnings will be at risk from increases in the interest rate. This risk will be borne by shareholders as the company may have to reduce dividend payments in order to meet its interest payment as they fall due. This
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INTRODUCTION Diamond Chemicals a major global competitor in the chemical industry and a leading producer of polypropylene. In 2001 the Corporation was facing losses in earnings and the slowdown of the global economy. The Earning per Share (EPS) had fallen by 50% from 1999 to 2000. The controller of the plant in Merseyside proposed a project of £9 million to renovate and rationalize the polypropylene production line at the plant to compensate for deferred maintenance and to exploit opportunities
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Capital Budgeting Capital budgeting is the process of identifying‚ analyzing and selecting investment project by a firm which the project expected will generate cash flows over one year. Each potential investment’s value will be estimated by using a Discounted Cash Flow (DCF) valuation in order to find its Net Present Value (NPV). All the incremental cash flows from the investment required estimating the size and timing by using this valuation. The NPV will influence by the discount rate‚ so select the
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Limmack (1999)‚ ‘UK Takeovers and Bidding Company Wealth Changes: The Impact of Survivorship and Other Potential Selection Biases on Post Outcome Performance’‚ Working Paper‚ University of Stirling‚ Jan. Barber‚ B. and John L. Lyon (1996) ‘Detecting Abnormal Operating Performance: The Empirical Power and Specification of Test Statistics’ Journal of Financial Economics‚ 41‚ pp. 359-399 Barber‚ Brad M Baumol‚ W. J (1959)‚ Business Behaviour‚ Value and Growth. New York: Macmillan Berger‚ P and E Berle‚
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four major divisions; Apparel Manufacturing‚ General Retail Merchandising‚ Footwear Manufacturing and Retailing and Furniture and Home Furnishings. Within these divisions were independent companies. Interco’s goals were long-term sales and growth of earnings‚ higher return on corporate assets and improved return on equity. To achieve these goals‚ Interco’s approach was to improve the profitability of existing operations and divesting underperforming assets. Besides that it had to make acquisitions with
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assignments. This case study presented a situation where Ms Kimi Ford‚ a portfolio manager at North Point Group‚ was considering buying some shares of Nike Inc. for the fund that she was managing. The reason was‚ after a quick sensitivity analysis of the discounted cash flow forecast‚ that she learned that Nike was undervalued at discount rates below 11.17%‚ which would make it beneficial to acquire its shares. In order to make a decision whether to buy Nike’s shares‚ she needed the estimation of Nike’s cost
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gains as advertising and sales expenses are reduced from 22% to 19%‚ as well as the costs of goods sold which could be reduced from 69% to 65%. The merger of the two companies would also get a synergy gain as they complement each other in sales earnings and distribution‚ where RTC has a strong edge in the industrial market and a strong European distribution system‚ while Monmouth has established strengths in the consumer market and a distribution system in the US and Canada. RTC would work well
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cash flows. Relevant information needed for an adequate project assessment from a cash flow perspective are: Initial: Purchase price; installation fees; training; inventory and related start-up costs Differential annual cash flows: Changes in earnings (before interest and taxes); tax impact; impact on depreciation; change in net working capital; and change in capital spending. Terminal cash flow: free cash flow (over project’s life) and recapture of inventory investment (working capital) In
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FRS 19 Deferred Taxation Summary Full provision for deferred taxation now required Accelerated capital allowances Pension costs Unrealised group profits Interest costs capatilised Unrelieved tax losses Other short term timing differences Not for: ` Re-valued fixed assets Rollover relief availed of Remittance of overseas sub. Recognise DT asset if it is more likely than not to be recovered Where assets continually re-valued to fair value: provide DT Permits discounting Use tax rates enacted or
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1. Introduction Beer is the most widely consumed alcoholic beverage and it is oldest prepared beverage in the world; the beer is third most popular after water and tea. The big two breweries that are Carlsberg Brewery Malaysia Berhad(CBMB) and Guinness Anchor Berhad(GAB) in malaysia. Strengths and weakness of Carlsberg Brewery Malaysia Berhad The strengths of Carlsberg Malaysia are that brand image‚ strong financial position quality and distribution network. The Carlsberg Group has a long tradition
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