Preparatory Questions for California Pizza Kitchen 1. In what ways can Susan Collins facilitate the cusses of CPK? 2. Using the scenarios in case Exhibit 9‚ what roles does leverage play in affecting the return on equity (ROE) for CPK? What about the cost of capital? a. Leverage increases Beta for the firm since debt to equity ratio increases from unlevered beta. We use 10 year Treasury bond as our risk free rate and for market risk premium we use current prime lending rate for June 2007
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1. Return on equity (ROE) using the DuPont formula is: a) Earnings before Interest/Sales * Sales/Assets * Assets/Equity * Earnings before interest/Net Income b) Net income*asset turnover*tax rate c) Return on Assets (ROA)*financial leverage d) Both a) and c) 2. Which of the following is true a) Return on Assets is influenced by financing activities b) ROE is not affected by financial structure c) Profit margin is a measure of asset
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The optimal capital structure Is there such a thing? Is there an Optimal Capital Structure? • Miller and Modigliani: • 1. You cannot derive value from financing strategies. If you finance with debt in a world with taxes‚ then you might add value from interest payments tax shields • Question: • If this is true for everyone‚ then why do not find more debt financing in more companies‚ i.e you find little debt in technological companies Myers and the Pecking Order • Prof. Myers found the following
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CVS Caremark Overview In our society‚ many people suffer from ailments and diseases that require medication to help them manage their illnesses while trying to maintain a normal lifestyle. Approximately 75% of the US population lives within three miles of a CVS (Datamonitor‚2011)‚ a retail pharmacy which sells prescription drugs and a range of general merchandise including over the counter drugs‚ beauty products and cosmetics‚ photo finishing‚ seasonal merchandise‚ greeting cards‚ and convenience
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26%‚ respectively. Both companies ’ 2005 returns on equity ("ROE ’s") are up from prior year. While Nordstrom posted a significant increase in ROE by 20% over prior year‚ Penney ’s ROE is up 152% over its 2004 ROE. While it is notable that both companies have strong 2005 ROE ’s and have increased their ROE ’s since 2004‚ there is a very large variance in ROE growth between the two companies. This suggests that although the 2005 ROE ’s are similar‚ the companies must have taken different paths
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Regulation and Its Impact On Capital Markets Businesses 3 Europe: Beyond the Crisis‚ New Challenges And Opportunities 31 Asia: The Future of Corporate and Investment Banking 37 Out of the Shadows: Central Clearing of Repurchase Agreements 56 Winning in Flow: Scale Is Everything 83 Foreword Foreword F our years after the financial crisis‚ the agenda for change within the global corporate and investment banking (CIB) industry remains significant
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Valuation- “projected financial performance into values.” Involves projecting/ making budgets. Value of an Asset = Value of Cash Flow (CF) it Will Generate (not profits) CF=1/(1+r)^1 value is based on three things- Current Cash Flow‚ Expected growth (used with to estimate future cash flow)‚ Riskiness of expected future cash flow (discount rate).Net Present Value- Value CFs using project discount rate based on risk Investment Decision-which real assets the firm should acquire.Choose positive and
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formula for calculating EPS). A second means of boosting EPS is to repurchase shares of stock‚ which has the effect of reducing the number of shares in the possession of shareholders. Return on equity (ROE) is defined as net income (or net profit) divided by total shareholders’ equity investment in the business. Higher ratios indicate the company is earning more profit per dollar of equity capital provided by shareholders. Because ROE is one of the five performance measures on which your company is
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Financial Analysis Of Dhaka Bank & Southeast bank Introduction The banking sector in Bangladesh comprises of four categories of scheduled banks. These are‚ nationalized commercial banks (NCBs)‚ government owned development finance institutions (DFIs)‚ private commercial banks (PCBs) and foreign commercial banks (FCBs). As of December 2004‚ total number of banks operating in Bangladesh remained unchanged at 49. These banks have a total number of 6‚303 branches including 10 overseas branches
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assigned. The primary analytical tool is valuation analysis‚ although the case briefly introduces the Modigliani and Miller (MM) with corporate taxes and Miller models. The case also illustrates financial risk by looking at the impact of leverage on ROE. Time Required The case requires 3-4 hours of preparation‚ plus an additional hour if the case has to be handed in. Complexity B--intermediate complexity. Flexibility The case illustrates many of the concepts associated with the use of debt financing
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