valuation methods. We believe that the good quality of data can guarantee the reliability of our valuation. Our valuation process includes the following six steps. 1. Decide the present value of unlevered free cash flows. 2. Evaluate the weighted average cost of capital. 3. Appraise the value of tax shields. 4. Access the terminal value. 5. Estimate the present value of non-operating assets. 6. Applying the illiquidity discount. 2. What discount rate should Ms. Zhang use for unlevered FCF for 2008-2012
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Warren E. Buffett‚ 2005 Case Questions: 1. What is the possible meaning of the changes in stock price for Berkshire Hathaway and Scottish Power plc on the day of the acquisition announcement? Specifically‚ what does the $2.17-billion gain in Berkshire’s market value of equity imply about the intrinsic value of PacifiCorp? Based on the multiples for comparable regulated utilities‚ what is the range of possible values for PacifiCorp? What questions might you have about this range? Assess the bid for
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Whenever a firm splits itself into separate units‚ with each unit having limited liability with respect to its financing‚ the capital structure of each unit becomes __________ 2) An investor’s risky portfolio is made up of individual stocks. Which of the following statements about this portfolio is true? 3) An all-equity-financed firm would __________. 4) The capital budgeting process can be broken down into five steps. These steps include which of the following? 5) Projects can be classified
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obtain optimal capital structure‚ and repurchase undervalue shares. In order to accomplish these objectives‚ Midland must calculate and use an accurate cost of capital that will provide reasonable valuation of their strategies. For example‚ funding overseas growth‚ Midland must use its cost of capital to analyze and evaluate the foreign cash flow; valuing projects‚ the cost of capital is used to discount future cash flow; optimizing capital structure‚ Midland continuously evaluate the cost of borrowing;
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AES - Case Analysis & Write up How would you evaluate the capital budgeting method used historically by AES? What is good and bad about it? Previously‚ the economics of a given project were evaluated at an equity discount rate for the dividends from any project and as it was mostly financed through local debt‚ which was non-recourse to the parent company‚ AES use to evaluate the dividend cash flows at a standard 12%. It is a simple approach with portions of sound reasoning. One could argue that
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Proposal 2.1.1 Evaluation 2.1.2 Financial Effect of Investment 2.1.3 Recommendation 2.2 Evaluation of West Coast (new equity offer) 2.2.1 Advantages 2.2.2 Disadvantages 2.3 Valuation of Creative Designs‚ Inc. 2.3.1 Capital Structure Argument 2.3.2 Weighted Average Cost of Capital Assumptions (WACC) 2.3.3 Cash Flows‚ Terminal Value‚ Equity Value Valuations 2.4 Pooling Implictions (Friendly + CD) 2.5 Friendly Cards Stock Valuation 3 Overall Assessment 4 Goals for the Financial Structure
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the additional value created by combining both firms bearing in mind the companies’ financial situations. All this considered‚ Nokia’s average share price during the last year is considered to have a 0.14% upside potential and synergies are estimated around 13% of Nokia’s average market capitalization. As a result‚ an offer at 19.4% premium over Nokia’s average market capitalization will be suggested with 100% in cash. 2 Acnowledgments The author would like to thank: Professor Peter
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1 Criteria 1 Possible Solutions 2 Present Analysis 2 Preferred Solution 4 Conclusion 5 Deluxe Corporation Introduction The case presents Deluxe Corporation and its current need of incorporating long-term debt into its capital structure to finance possible acquisitions‚ dividend payout and repurchasing the firm’s securities. The company is a major competitor in check printing industry that is characterized by intense price competition‚ concentration and slow decline in
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Management (p. 318) Capital Budgeting 101 • Step 1: Estimate Discount Rate • Step 2: Project Cash Flows – Cash flows for 1989-98 in tables – Terminal value • Step 3: Compute Net Present Value (NPV) – Accept positive NPV projects Discount Rate • As we discussed‚ the discount rate is the weighted average cost of capital (WACC). D E WACC E ( rd )(1 t ) E ( re ) DE DE where t = tax rate‚ E(rd) = expected cost of debt D = amount of debt in capitalization E(re) = expected cost of equity E = amount
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Mid-Term Examination‚ Winter 2010 Level: Masters Full Marks: 100 Program: MBAe Section B Pass Marks: 60 Course: Financial Management Time: 3 Hrs. Term: III Candidates are required to be original and fair in the presentation of their answers. The figures in the parenthesis indicate the marks for respective question. Attempt all the questions Section A Attempt all questions Each question carries 6 marks [5 x 6 =30] 1. You have to pay $12‚000 a year in school
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