ECN372 Corporate Finance 2‚ 2012/2013 Problem Set 5: Solutions 1. a) The face value of debt is given by: 0.5 × F + 0.5 × 40 = 60 ⇒ F = 80 The value of the firm is: V = 0.5 × 150 + 0.5 × 40 = 95 The value of equity is: E = 95 − 60 = 35 b) The value of debt: D = 0.5 × 50 + 0.5 × (20 − 10) = 30 The value of the firm is: V = 0.5 × 70 + 0.5 × (20 − 10) = 40 The value of equity is: E = 40 − 30 = 10 c) If the firms were to merge then: The value of debt: D = 0.5 × (80 + 50) + 0.5 × (40 + 70
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officials suspected Friedman of being a sophisticated drug dealer‚ and they were right. When he had a chance to buy three pounds‚ a quantity only a dealer would purchase‚ he not only did so‚ but he bargained with skill‚ showing a working knowledge of the business. Friedman was not entrapped—he was caught. I agree with Friedman not only did the informant ask for drugs‚ but he asked him constantly after he said no which could have easily influenced Friedman to sell the informant the drugs. 2.
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Financial Statement Analysis and Business Valuation of TCS By: Prashant Chaudhary Table of Contents About TCS 3 Calculation of Beta 3 Cost of Capital 4 Concepts of Cost of Capital 4 Weighted Average Cost of Capital 6 Financial Ratios 8 Liquidity Ratios 8 Solvency Ratios 8 Profitability Ratios 9 Comparison with Competitors in the Industry 10 Free Cash Flow 11 Sales forecast 13 Reformulated balance sheet 14 Reformulated Income Statement 15 Appendix A: Balance
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VALUATION TECHNIQUES Vault Guide to Finance Interviews Valuation Techniques How Much is it Worth? Imagine yourself as the CEO of a publicly traded company that makes widgets. You’ve had a highly successful business so far and want to sell the company to anyone interested in buying it. How do you know how much to sell it for? Likewise‚ consider the Bank of America acquisition of Fleet. How did B of A decide how much it should pay to buy Fleet? For starters‚ you should understand that the value
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Equity Valuation: Discounted Cash Flow and Residual Income Models Introduction Valuation plays a very important role when companies are trying to increase their value‚ raise money‚ acquire another firm or sell a subsidiary‚ also when a company decides to go public. Managers‚ investors and shareholders need to have the most accurate and reliable information in order to make decisions‚ that is why valuation is a fundamental exercise in corporate finance. It is pretty evident that whatever
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Krispy Natural Problem Identification 1. Marne’s high expectations are not realistic- wants to double projections a. Test market results for the southeast regions do not indicate an impressive gain in the market (i.e. market share increased from 9% to 10% when it was expected to reach 15%‚ display activity was below what the team expected) b. The good results in Columbia were due to sampling‚ significant price discounts and couponing- can’t keep this 2. Test market results for the southeast regions
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Case Study 1:- Krispy Kreme Doughnuts inc Maytham Hussein Saeed Question 1 Is Krispy Kreme financially “healthy”? What do the statement show‚ what do the ratio show? Answer Based on the Common Sized Financial Statement of Limited Service Restaurant Averages and Krispy Kreme (KKD) the value of KKD’s cash and equivalents is 3.1 and its lower that the 3 years industry average’s value of 12.8 in 2001‚ 12.4 in 2002 and 13.7 in which is not a good sign
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Krispy Kreme Case Study To become a Krispy Kreme franchisee‚ an entrepreneur must have the dream of one day owning their own business‚ have a willingness to take risks‚ be able to recognize opportunities when they occur and be a naturally optimistic thinker who can use their time‚ capital‚ and talent to achieve success. To be considered for a Krispy Kreme franchise‚ entrepreneurs must have demonstrated a time standing history of success as a businessperson‚ to be willing to work as part of and
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Valuation : * Price earnings ratio : DESCRIPTION | Mar-12 | Mar-11 | Mar-10 | Mar-09 | Mar-08 | Price-earnings ratio | 23.04 | 24.23 | 12.71 | 7.25 | 12.17 | This ratio reflects the following factors : growth prospects‚ risk characteristics ‚shareholder orientation ‚corporate image and the degree of liquidity.It indicates company performance and forecast future performance.Ratio is decreasing and it is good sign because investors will get high earnings.But risk will
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Appendix to Chapter 7 Evidence on the Efficient Market Hypothesis Early evidence on the efficient market hypothesis was quite favorable to it. In recent years‚ however‚ deeper analysis of the evidence suggests that the hypothesis may not always be entirely correct. Let’s first look at the earlier evidence in favor of the hypothesis and then examine some of the more recent evidence that casts some doubt on it. EVIDENCE IN FAVOR OF MARKET EFFICIENCY Evidence in favor of market efficiency has examined
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