2. What is the maximum price they could expect to pay Monmouth‚ based on an analysis of valuation using discounted cash flow‚ calculation of WACC and terminal value determination? 2. Based on the DCF valuation and using a WACC of 8.25% (the beta assumed to be 1‚ the average beta of comparable firms and the coupon rate to be 7.96%‚ the rate for BB rated companies) and a growth rate of 5.5%. The fair price is $40.4 per share for Robertson‚ lower than the $50 offered by Simmons to sell their
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“The equity premium: Why is it a puzzle?”‚ Financial Analysts Journal‚ January/February‚ 54-69. Mehra‚ R. and E. Prescott (1985)‚ “The equity premium: A puzzle”‚ Journal of Monetary Economics 15(2)‚ 145-161. Penman‚ S. H. (2001)‚ Financial Statement Analysis and Security Valuation‚ New York: McGraw-Hill. Ruback‚ Richard S. (1986)‚ “Calculating the Market Value of Risk-Free Cash Flows”‚ Journal of Financial Economics ‚ March‚ 323-339. 27 80 common and uncommon errors in company valuation Ruback‚ R. (1995)
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Question 1 Using a SWOT analysis‚ identify the key strategic fits between the two companies. What are the most important expected synergies? Strength Weakness Ability to serve customers at lower cost Compaq was a significant player in enterprise systems and HP in IT services business Wider spectrum of products for its clients through the merger Strong brand recognition‚ something that takes time to build Highly complimentary R&D Overlapping management Overlapping product
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In 2005‚ Value Trust‚ an $11.2 billion mutual fund managed by Bill Miller‚ had outperformed its benchmark index‚ the S&P 500‚ for a consecutive 14 years. This record marked the longest streak of success for any manager in the mutual fund industry‚ doubling the previous record. While Miller had been beaten in individual years‚ no manager has been as consistent. This has provoked many different questions in academia because it defies current conventional theories such as the Efficient Market Hypothesis
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Case 3: Ben & Jerry’s 1) Ben & Jerry’s has not been successful in fulfilling all three elements of its mission statement. Ben & Jerry’s has been successful in the element of “Product”; they have continued to make‚ distribute‚ and sell the finest quality super premium ice cream in a wide variety of flavors. Ben & Jerry’s has also been successful in the element of “Social”. Since 1985 Ben & Jerry’s has donated 7.5% of its pretax earnings to various social foundations and
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and your valuation model. (Hint: pay attention to the Working Capital Assumptions provided in Ex 1. For example‚ Accounts Receivable 41.67× means on average it takes 41.67 days to receive payment from customers. ) According to Jennifer Zhang’s analysis‚ we divide the stand-alone value of AirThread into two parts—operating value and non-operating value-- and then add the two parts together to get the result. First‚ when we calculate the operating value‚ we use the DCF model. We pick the risk-free
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are efficient? As Chapter 10 questions‚ if further evidence continues to surface that capital markets do not always behave in accordance with the efficient market hypothesis‚ then should we reject the research that has embraced the EMH as a fundamental assumption? In this regard we can return to earlier chapters of this book in which we emphasised that theories are abstractions of reality. Capital markets are made of individuals and as such it would not (or perhaps‚ should not) be surprising to
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Valuation of! AirThread Connections J. Zhang Consulting: Mohammad Alkhamis‚ Marci McCall‚ Lindsay Ramirez‚ Sarah Spring‚ Mavis Yu ACC Review of AirThread Acquisition • Opportunity to acquire AirThread Connections • Base-Case Valuation of AirThread Connections: What our competitor’s will be willing to pay Value of AirThread Connections “as-is” • Upside Valuation of AirThread Connections: AirThread has strategic fit with current ACC operations Potential synergies for
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Strategy and Performance DFA’s business strategy relies on a few basic principles. First‚ and most importantly‚ markets are efficient. This is the pillar on which the firm is based and is supported by the fact that the fund does not use technical analysis to execute trades. Second‚ the firm believes in sound academic research. This research (from Fama‚ French‚ and Bonz) has directed the firm to invest in stocks below the 20th percentile in market cap and those with high book-to-market value (“Value
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to management on future cash flows. Hence‚ this method is considered as an alternative for crosschecking. The assumptions are the dividends grow constantly in perpetuity at 3 percent and the debt ratio is also constant at 28.1 percent. For further analysis‚ please refer to item 2a and 3c in the Appraisal. 2. The EBIT Multiples Approach: Under this methodology‚ the debt-equity ratio was not required. Thus‚ the value of the firm is approximately $4.93 billion after liquidity discount was taken into account
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