Understanding Financial Objectives Financial Aims: the broad‚ general goals of the finance and accounting function or department within an organisation. Financial Objectives: the specific‚ focused targets of the finance and accounting department within an organisation. Financial Strategies: long-term or medium term plans‚ devised at senior management level‚ and designed to achieve the firm’s financial objectives. Financial Tactics: short-term financial measures adopted to meet the needs of
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investment‚ if successful‚ would offer numerous benefits to the company‚ capturing greater market share‚ strengthening relationships with major customers‚ crowding out competition and increasing firm value. Nonetheless‚ the decision carries significant risks and could lead to a substantial decline in firm value‚ if not bankruptcy‚ should any number of variables prove unfavorable to HPL. Moreover‚ the project relies heavily on a contract with a single large customer. Given the high level of risk and relatively
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determine whether a stock is undervalued or overvalued? How valid is the discounted present value approach? How can one value a company as a going concern‚ and how does this change in the context of a potential acquisition‚ or when the company faces financial stress? Finding a value for a company is no easy task -- but doing so is an essential component of effective management. The reason: it’s easy to destroy value with ill-judged acquisitions‚ investments or financing methods. This article will take
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m.Module 3 CAPITAL BUDGETING Meaning of Capital Budgeting :- Capital Budgeting is the process of making Decisions regarding long term investments in Fixed Assets which are not meant for sale. It is long range planning to employ the available capital for the purpose of maximizing the long term profitability of the concern. Definition of Capital Budgeting:- Prof I.M.PANDEY Defines Capital Budgeting as the firms decision to invest its current funds most efficiently in long term activities
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its income D that generally is a company 4. A _______ is a financial intermediary that receives premium payments that are used to purchase assets to cover future possible payments. A building society B credit union C savings bank D life insurance office 5. Financial markets: A act as intermediaries by holding a collection of assets and issuing claims based on them to savers B issue claims on future cash flows of individual borrowers directly to lenders C transmit funds
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Create Value Invest $100 million today in a project that generates a stream of cash flows valued at $150 million. Investment generates an incremental $50 million in wealth for its shareholders. The project has a net present value (NPV) of $50 million. Input $100 M Output Project $150 M Value Created = $150M - $100M = $50 How is this possible? Investments that Destroy Value DaimlerChrysler formed by the $36 billion acquisition of Chrysler by Germany’s Daimler-Benz in 1998 Net cash outflows
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decide if ROI is a good indicator. ROI measures the net income over the total investment. One problem with ROI is that it will increase when capital assets depreciate. The ROI in the first year may be lower but thereafter it will increase‚ rendering this indicator ineffective to determine if they should take on the project. Another point to note is that investments that are above the company’s cost of capital should be undertaken as it adds value to the
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analysis as well as calculations such as Return on Assets‚ Return on Equity‚ Loan-to-Value ratio and the Gross Rent Multiplier. All calculations are found in the appendices. Original Setup Using the original assumptions our initial results regarding the desired profitability of the Shady trail are positive: * Net Operating Income (NOI)‚ Cash Flow from Operations (CFO) and Cash Flow after Financing (CFAF) are all positive. * A Loan-to-Value Ratio of 70% is acceptable for a small industrial
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Case analysis "Cost of Capital at Ameritrade" Cost of capital refers to the maximum rate of return a company must earn from its investments‚ so that the market values of the company’s equity shares do not go down. The people at Ameritrade are not in agreement on the best estimate of the cost of capital. Research analyst put the cost of capital at 12%‚ while other members of the management estimate it to be at 9% and the CFO estimates it to be at 15%. The CEO of the company is optimistic that
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Chapter 10 Question 1 Marks: 1 Which of the following is NOT a capital component when calculating the weighted average cost of capital (WACC)? Choose one answer. | a. Long-term debt. | | | b. Accounts payable. | | | c. Retained earnings. | | | d. Common stock. | | | e. Preferred stock. | | Correct Marks for this submission: 1/1. Question 2 Marks: 1 For a typical firm‚ which of the following sequences is CORRECT? All rates are after taxes‚ and assume the firm operates at its
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