0Chapter 10: Strategic Control and Corporate Governance * Organizations must have effective strategic controls if they are to successfully develop and implement their strategies. * This means having systems that allow the organization to effectively respond to environmental changes as well as balance and align the organization’s culture‚ rewards‚ and boundaries. * Overriding this is the goal of the firm’s owners (shareholders) and their elected representatives (board of directors)
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Overview of Relevant Formulas Corporate Finance (B40.2302) _________________________________________________________________________________________ 1. Present value of $1 to be received after t years at discount rate r: 2. Present value of annuity of $1 per year for t years at discount rate r: $1 (1 + r )t ⎡1 − (1 + r ) − t ⎤ ⎢ ⎥ × $1 r ⎣ ⎦ 1 ⎡ (1 + g )t ⎤ 3. Present value of growing annuity of $1 at rate g per year at discount rate r: ⎢1 − ⎥ × $1 r − g ⎣ (1 + r )t ⎦ $1 r 4. Present value
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According to Emery‚ Finnerty‚ and Stowe (2007) the 12 Principles of Finance are divided into three groups that include: Group 1 Competition in Economic environment A. The Principle of Self-Interested Behavior: Theory suggests people behave in a mannerism that is most beneficial for them. B. The Principle of Two-Sided Transactions: Theory suggests there are two perspectives or positions in every situation. C. The Signaling Principle: Theory suggests people make assumptions based on actions
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CHAPTER 10: COST OF CAPITAL HOMEWORK 1. The Dempere Imports Company’s EPS in 2009 was $2.82‚ and in 2004 it was $1.65. The company’s payout ratio is 30%‚ and the stock is currently valued at $41.50. Flotation costs for new equity will be 15%. Net income in 2010 is expected to be $15 million. The market-value weights of the firm’s debt and equity are 40% and 60%‚ respectively. a. Based on the five-year track record‚ what is Dempere’s EPS growth rate? What will the dividend be in 2010?
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amounts that are involved in the current year will be added to or deducted from accounting income to arrive at taxable income. 1. Financial reporting purposes: straight line depreciation method is used for plant assets that have a useful life of 10 years; for Tax Purposes: CCA declining balance method is used with a rate of 20%. i. Reversing Entry that results in future taxable amounts and‚ therefore will usually give rise to a future income tax liability. * Asset’s cost is deducted
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credits. Part 1: Multiple-choice questions (10 questions‚ 1 points each‚ 10 points total) 1) According to M&M Theorem in the absence of corporate taxes‚ an increase in leverage (i.e.‚ an increase in D/E ratio) will lead to a) Higher cost of equity b) Low cost of equity c) No change in cost of equity d) The information provided is not sufficient to chose any of the above questions Ans: A 2) According to M&M Theorem in the absence of corporate taxes‚ an increase in leverage (i.e.‚ an
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Chapter 10—Developing and Managing Products MULTIPLE CHOICE 1. When the manufacturer of L’Oreal shampoo introduced shampoos designed specifically to appeal to preteens‚ the product was: e.a.b.a.a.c.b.c.e.b.e.c.a.d.e.b.d.e.a.c.b.b.d.e.c.d.b.d.b.a.b.e.d.c.c.a.a.b.b.e.a.b.b.b.c.b.e.a.d.c.b.d.c.a.e.b.e.a.e.e.a.c.b.a.d.e.a.d.a.c.d.c.e.d.b.c.c.d.b.e.a.c.d.e.d.b.a.e.a.e.c.a.d.e.e.e.a.c.d.b.a.c.b.a.d.d.a.b.c.b.a.e.c.a.c. a new product because it was an improvement or revision of an existing product
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Corporate Finance – Chapter 2 – Long Quiz 1 1) Marvelous Entertainment Group‚ Inc. had net income of $32.7 million in 2005. The firm paid no dividends. If there were no further changes to the stockholders ’ equity accounts‚ then _____ by $32.7 million. [ ] common stock must have increased √ [ ] retained earnings must have increased [ ] total stockholders ’ equity must have decreased [ ] capital surplus must have decreased [ ] the market value of the firm ’s stock must have
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“INTRODUCTION TO CORPORATE FINANCE” “Where is This Slide From”? • Most of the slides we use in this unit are provided by the Publisher of the required text “…as down-loaded from Connect…” • Sometimes we modify slides by adding or removing content. Other times we use slides from other sources. Occasionally we ‘make’ slides. • Note that lecture slides are not numbered sequentially. • Slides are identified in the lower RHS corner. • Identifier “1-3” refers to text chapter 1 slide 3. •
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International Corporate Finance 1. How are percentage changes in a currency’s value measured? Illustrate your answer numerically by assuming a change in the Thai baht’s value from a value of $0.022 to $0.026. Answer: Percent △ in foreign currency value = st-st-1 st-1 = $0.026-$0.022$0.022 ≈ 18.18% 2. What are the basic factors that determine the value of a currency? In equilibrium‚ what is the relationship between these factors? Answer: The basic factors that determine the value
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