Financial Analysis JET2 Task 3 A1. Capital Structure Recommendation A sound capital structure needs to be in place for Competition Bikes to maximize its shareholder return and expand. A good capital structure would ensure adequate funding and future business stability. However‚ adequate funding involves capital financing which also has its own risks. If bonds are issued‚ the company would have to pay interest on them but if sales projections aren’t met‚ this could have a huge negative impact
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the project. However‚ MIRR is better indicator of the project’s true profitability IRR v. MIRR Valuation Methods The Internal Rate of Return (IRR) is defined as the rate of return that would make the present value of future cash flows plus the final market value of an investment or business opportunity equal the current market price of the investment or opportunity. The Modified Internal Rate of Return (MIRR) assumes that positive cash flows are reinvested at the firm ’s cost of
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Accounting income also often recognizes losses for tax purposes as well‚ even though the economic loss may have taken place at another time. Economic profit is the sum of the present values of all the cash flows net of expenses generated by the firm’s actions. Economic profit measures true increments to value‚ but is hard to measure. Accounting profit is correlated with economic profit‚ but not perfectly so. Accounting profit can be measured much more easily. b. What is the relationship
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Leverage 2.4 2.14 Financial Leverage 1.11 1.07 Combined Leverage 2.66 2.29 2. You are analyzing the beta for ABC Computers Ltd and have divided the Company into four broad business groups‚ with market values and betas for each group. Business group Market value of equity Unleveraged beta Main frames Rs 100 billion 1.10 Personal Computers Rs 100 billion 1.50 Software Rs 50 billion 2.00 Printers Rs 150 billion 1.00 ABC Computers Ltd had Rs 50 billion
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repair one of its’ steam boats or replacing it with a new diesel-powered vessel. After evaluating the different scenarios presented in the case‚ it is our recommendation that ESC should rent a diesel-powered boat. This decision was based on a Net Present Value (NPV) analysis on six different scenarios. Each scenario and its respective NPV is summarized below: Scenario 1. Rehabilitation of Cynthia - selling existing parts & converting to stoker firer 1950 2. Rehabilitation of Cynthia - using existing
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domestic currency assets. E: none of the above. 4. If the net foreign return is lower than the domestic interest rate then: A: the interest parity forward rate is lower than the actual forward rate. B*: the interest parity forward rate is higher than the actual forward rate. C: the interest rate differential is lower than the forward spread. D: the forward discount is higher than the interest differential in favor of the home currency assets. E: none of
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flow (DCF) methods: the net present value (NPV) method and the internal-rate-of-return (IRR) method 4. Use and evaluate the payback method (PB) 5. Use and evaluate the accounting rate-of-return (ARR) method 6. Income taxes and capital expenditure analysis 7. Post-completion audits Capital Budgeting • Capital budgeting involves investment decisions in projects that spans multiple years. – A good investment decision • One that raises the current market value of the firm’s equity‚ thereby
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per share (EPS). Optimizing shareholder’s wealth is the optimum goal and therefore‚ this approach analyzes the high EPS based on an expected range of earnings before income taxes (EBIT). 2. Valuation: Determines impact of debt use on shareholder’s value by determining the level of debt at which the benefits of increased debt no longer outweigh the increased risks and expenses associated with financing (Wenk‚ 2012) 3. Cash Flow: Analyzes a firm’s debt capacity by using the weighted average of cost
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EVQUES T3 SuB 2011 Key 1. In a recent period 12‚250 units were made and there was a favorable labor efficiency variance of $22‚500. If 41‚000 labor-hours were worked and the standard wage rate was $12 per labor-hour‚ the standard hours allowed per unit of output is closest to: A. 3.19 B. 3.35 C. 3.50 D. 6.00 [pic] AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Measurement Bloom ’s: Analysis Brewer - Chapter 09 #40 Learning Objective: 3 Level: Hard Source: CIMA
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Summary i I. Privatization 1 II. Forms of Privatization 1 III. Privatization around the World 3 IV. Reasons for Privatization 4 V. Valuation of Assets 7 VI. Privatization Examples 9 VII. Issues Associated with Privatization VIII. Conclusion 19 21 TABLES: 1 2 3 4 5 Risk Distribution in Various Delivery Systems Net Present Value Example Internal Rate of Return Example Illinois Tollway Revenues and Expenses Prisoners Held in Private Facilities 5 8 8 11 14 APPENDIX: A B C Weighted
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