assumptions driving our calculations: 1) a 10.75% discount rate‚ 2) a 10% guest room erosion rate‚ and 3) the omission of irrelevant staffing costs (16% of sales) due to long-term salary contracts. We have determined that while both options are profitable‚ Beach is more so. However‚ before a final decision is made‚ more research into the qualitative aspects of these undertakings needs to be done; community footprint impacts and room revenue erosion rates must also be examined in more detail. Relevant
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Another investment appraisal technique that could be used is accounting rate of return. This appraisal measures the profitability of any investment and the profit is expressed as a percentage. For the soccer school the accounting rate of return is 8.8% whereas it is 17.6% for the netball school. The comparison between these two proves that the netball school would be a better investment as the percentage of accounting rate of return is much higher than that of the soccer school. In addition‚ another
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between risk and return is correct? A. Investors do not need to be compensated for taking on risk. B. Investors generally demand higher return for lower risk investments. C. Safer investments tend to have lower returns. D. Higher risk investments provide lower returns. E. Risk and return are not related. 2. Which of the following concerning the relationship between risk and return is correct? A. Risk and return are inversely related. B. Investors generally require a higher return as they take
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SCHOOL OF BUSSINESS AND LAW LONDON NAME: Mr. ASHISH KUMR NAFRI STUDENT ID: 0022KONS1109 SUBJECT: ACCOUNTING AND DECISION MAKING TECHNIQUES (ADMT) LECTURER: MR. S. A. PALAN CONTENTS Introduction…………………………………………………………………….………2 Define Capital Investment Appraisal…………………………….………………….…2 Discounted cash flow methods……….………………………….………………….…4 Explanation of NPV…………………… ......................
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Leveraged Buyout (LBO) approach. This means ACC will finance money though equity and debt to buy AirThread and pay the debt by the cash flows or assets of AirThread. * In another word‚ it’s a highly levered transaction using a fixed WACC discount rate; however the leverage is changing in fact. * If we want to use WACC method‚ one assumption must be met: this program will not change the debt-equity ratio of AirThread. Under LBO approach‚ it’s impossible. * So we decide to use APV method
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$1‚000 par value‚ pays interest at 14 percent‚ and is scheduled to mature in 12 years. For bonds of this risk class‚ you believe that a 12 percent rate of return should be required. The second investment that you are considering is a preferred stock ($100 par value) that sells for $80 and pays an annual dividend of $12. Your required rate of return for this stock is 14 percent. The last investment is a common stock ($35 par value) that recently paid a $3 dividend. For this stock‚ the firm’s
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administered interest rate. On the other hand‚ the interbank call money market and the stock market are not integrated with the rest of segments of the financial system due to their high volatility in the recent past. Deposit rate of the banks is found to be the “reference rate” for the Bangladesh’s financial system. Therefore‚ efforts must be made to make this rate as much market based as possible since most other rates tend to move in line with the movements of the reference rate. Effectiveness of
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(Bond valuation) A $1‚000 face value bond has a remaining maturity of 10 years and a required return of 9%. The bond’s coupon rate is 7.4%. What is the fair value of this bond? Calculating PV factor: i= required return = 9% = 0.09 n= 10 years Using Cash Flow of $1000 to calculate present value‚ Cash flow= $1000 PV factor = 1/(1+i)^n = 0.42241 PV = $1000*0.42241= 422.41 Using Coupon Rate to calculate present value of Annuity Cash flow= $1000 * 7.4/100 = $74 PV factor = (1/i)*(1-
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Present Value is the current worth of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discount rate‚ and the higher the discount rate‚ the lower the present value of the future cash flows. Determining the appropriate discount rate is the key to properly valuing future cash flows‚ whether they be earnings or obligations. Present Value of annuity is a series of equal payments or receipts that occur at evenly spaced intervals
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1. The top management of Teletech Corporation was applying 9.30% as a hurdle rate to all capital projects and as a performance evaluation‚ regardless of the business units. 2. Corporate Telecommunications Services Products and Systems MV asset weights 100% 75% 25% Bond rating A- / BBB+ A BB Pretax cost of debt 5.88% 5.74% 7.47% Tax rate 40% 40% 40% After-tax cost of debt 3.53% 3.44% 4.48% Equity beta 1.15 1.04 1.39 Rf 4.62% 4.62% 4.62% Rm
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