Midland Energy Resources, Inc.

Midland Energy Resources, Inc.
Midland Energy
[pic]
Midland Energy Resources, Inc.
Cost of Capital
Table of Contents
I. Executive Summary
II. Introduction
III. Cost of Capital
IV. Risk & Tax Rate
V. Capital Structures
VI. WACC
VII. Conclusion
VIII. References
I. Executive Summary
Midland Energy Resources is a global energy company with operations in oil and gas exploration and production(E&P) providing a broad array of
products and services to upstream oil and gas customers worldwide including refining and marketing (R&M), natural gas, and petrochemicals. Janet
Mortensen, the senior vice president of project finance for Midland Energy Resources must determine the weighted average cost of capital (WACC) for
the company as a whole and each of its divisions ... Show more content on Helpwriting.net ...
Cost of Equity is the return that stockholders require for a company. A company's cost of equity represents the compensation that the market demands
in exchange for owning the assets and bearing the risk of ownership. Based on capital markets the cost of equity varies in direct relation to the assumed
risk in that specific market. The distinctive of the firm is the sensitivity to market risk (ОІ) which depends on everything from management to its
business and capital structure. Therefore past performances and present conditions have a direct effect on the overall value. Applying calculations at a
divisional level allows specified markets to be analysis based on present market conditions for that service or product. The formula used to calculate
Cost of Equity is:
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Midland's projected capital spending in refining and marketing would remain stable, without substantial growth in 2007 and 2008. Petrochemical
capital spending was expected to near future and new investments would be undertaken by joint ventures outside the United States. Equity interest with

foreign partners generally hovered at 50% for Midland's foreign partners. Mortensen measured performance or business in two ways: (1). Performance
was measured against plan over 1–, 3– and 5– years. (2). Measured based on economic value added (EVA) in which the company defined debt–free
cash flows as net operating
... Get more on HelpWriting.net ...

Delta Airlines Strengths And Weaknesses
Q3 – OE_Strengths
What do you see as Delta's particular strengths?
"It's the free cash flow. Looking at it from a financial perspective. They're a leader in their industry. They have high corporate customer participation.
The corporate customer is the profitable customer for them, and they have a good share of that market. They've got strong free cash flow generation.
They've got their debt under control. They're good stewards of capital in terms of really protecting the shareholder and they're not capricious with their
spending on capital and new aircraft and that kind of thing."
Q4 – OE_Weaknesses
What do you see as Delta's particular weaknesses?
"They can control only a certain amount of their destiny. They're good at controlling what they can control. But the industry, there's a perception that
it's a highly cyclical industry and people in this industry don't have the best capital management skills. They overspend going into a downturn. And
they can't control the consumer demand a lot of time. They can't control what happens in the world. But consolidation in the industry has helped quite a
bit and the division of slots at the airports. And ownership of certain hubs allows for a better industry structure."
Q6 – OE_StrategyElements
Based on ... Show more content on Helpwriting.net ...
In some respects they're comparing themselves to Home Depot because Frank Blake was on the Board of Home Depot and now he's on the Board
of Delta. He's the champion for taking free cash flow and increasing the dividend, and this growth in the dividend and shareholder buybacks is the
template that Home Depot kind of did for a long time here. And now he's trying to implement this from the Board at Delta. Home Depot would be
one. You could throw out one of the better industrial company. People also talk about the railroads as well, and basically the consolidation in the
industry. There's a corollary to the airlines as to the railroad

The Cash Flow Of The Free Cash Flows ( Fcf )
Firm Valuation
As shown in Exhibit 4, in order to value a company we first started by calculating the free cash flows (FCF) year by year. In order to do so, we
decided to use the forecasted revenue numbers from Capital IQ and calculate all the other metrics by using the trends we saw in last three years
(Exhibit 3). The company can allocate free cash flow in several ways, including but not limited to: repurchasing stock, reinvesting for growth and
paying out dividends.
After calculating the free cash flows, we had to calculate the terminal value of the company. Doing so required us to estimate a terminal growth rate.
We decided that 3.1% growth rate was suitable for Kimberly–Clark. This rate was integrated by 2% expected inflation growth per year in the US
(Federal Reserve), in addition with a 1.1% expected growth of the population (World O Meters). As a team we believe that since KMB is in a
personal care industry, it can be perceived as a commodity, thus the population growth should directly affect our sales. Necessary goods will still have
relevance in the future.
After terminal value was calculated, we proceeded by valuing KMB using the entity approach. As shown in the Exhibit 5, the value of the assets is
$55,128.44. This was calculated by discounting all the unlevered cash flows and the terminal value by our WACC of 6.8257%. For the total value of
debt we used the market value of $7064.3 million. After the value of the equity was calculated, we got the implied debt

Net Present Value and Free Cash Flow Essay example
1. Given the proposed financing plan, describe your approach (qualitatively) to value AirThread. Should Ms. Zhang use WACC, APV or some
combination thereof? Explain. (2 points) * From the statement of AirThread case, we know that American Cable Communication want to raise capital
by 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... Show more content on Helpwriting.net ...
* Jennifer decided to use Bianco's recommendation, a 5% equity market risk premium (=5%) * Interest rate had a 125bp spread over the current yield
on 10–year US Treasury bonds (=4.25%). * By CAPM, we can get (8.3277%). We can calculate the each of different companies and get the average
value. Or we can use CAPM once from average =0.8155. These two results are equivalent. * We already know the new is the interest rate of debt
(5.5%). We use the average industry level (40.1%) as ATC's D/E ratio like discussed in case page 7. By, we can get the new (9.46%). * By, we can
calculate the new WACC is 7.7%.
Ms. Zhang should us the new WACC to the terminal value * She is considering thecash flow paid to all the equity or debt holders. So she cannot use
the equity cost of capital.
3. Compute the unlevered free cash flow and the interest tax shields from 2008 to 2012 based on estimates provided in Exhibit 1 and Exhibit 6. (3
points)
Unlevered Free Cash Flow
Chart 2
Free cash flow is calculated as:
EBITГ—1–t+Depreciation&Amortization Expense–Increase In NWC–Capital Expenditure * First, we calculate the Net Operating Profit after
Tax, which is equals to EBITГ—1–t. * Second, we use the working capital assumptions to calculate the net working capital:
The formulas are:
Account Receivable=Total RevenueГ—41.67360
Days Sales Equip. Rev. =EquipmentГ—154.36360
Prepaid Expenses= (System Operating

Free Cash Flow for Starbucks
My company is Starbucks, which is a quick service chain coffee shop. Among its many competitors is McDonald's, especially since they created their
McCafe concept. The homepage of the company is http://www.starbucks.com/. There are a number of sources of financial information about the
company. The published annual reports are available online (http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol–reportsannual). These are
not usually revised. For revised and/or restated financial statements, MSN Moneycentral is a reliable aggregator of such information, and also produces
some of the key ratios. http://investing.money.msn.com/investments/key–ratios?symbol=SBUX
My interest in the company is that it is well–known and has had some ups and downs in the past few years that make it an interesting company to
study. In addition, both the company and its major competitors are publicly traded, which makes doing a comparison easier than if I chose a company
whose major competitor was a subsidiary or otherwise not publicly traded.
The return on assets for Starbucks is 17.7%, while the ROA for McDonalds is 17.0%.
"Competitive financial position" is not a known financial analysis concept. There is a competitive position and there is a financial position, but the
conflation of these two is not known, and indeed a Google search of the term shows zero instances in which those three words are used in sequence.
The competitive position of Starbucks is fairly strong, but nowhere near

ModГЁles de Free Cash Flow
ModГЁles du Free Cash Flow ThГЁmes choisis en gestion – Г‰tats financiers et placements (ADMI 3500) Les exemples sont tirГ©s du livre : Stowe,
J. D., Robinson, T.R., Pinto, J. E. et Henry , Equity asset valuation, Second Edition, 2010, CFA Institute Investment Series 2 1. Introduction Les
modГЁles d'Г©valuation basГ©s sur les flux monГ©taires actualisГ©es (DCF model) considГЁrent la valeur intrinsГЁque d'une action comme
Г©tant la valeur actualisГ©e des flux monГ©taires espГ©rГ©s. Dans ce chapitre les flux monГ©taires utilisГ©s par les modГЁles d'Г©valuation
sont : le free cash flow to the firm (FCFF) et le free cash flow to equity (FCFE). Les dividendes reprГ©sentent les flux monГ©taires distribuГ©s aux
actionnaires tandis que les free cash flow... Show more content on Helpwriting.net ...
19 PrГ©parГ© par FranГ§ois Boudreau 29/09/2010 22 PrГ©parГ© par FranГ§ois Boudreau 29/09/2010 23 PrГ©parГ© par FranГ§ois Boudreau 29
/09/2010 7.2 Calculer le FCFF Г partir de l'Г©tat des flux de trГ©sorerie. Les analystes utilisent souvent le flux monГ©taire opГ©rationnel (CFO),
tirГ© de l'Г©tat des flux de trГ©sorerie, comme point de dГ©part pour calculer le free cash flow puisque le CFO incorpore les ajustements pour les
dГ©penses non–liquide et pour les investissements dans le fonds de roulement. Faits Г remarquer : les dГ©penses d'intГ©rГЄt sont classГ©s dans la
section des flux monГ©taires provenant des activitГ©s opГ©rationnelles. Les dividendes payГ©s aux actionnaires sont classГ©s comme des
activitГ©s de financement. 24 PrГ©parГ© par FranГ§ois Boudreau 29/09/2010 Pour estimer le FCFF Г partir du CFO, nous devons faire un
ajustement avec les intГ©rГЄts payГ©s: FCFF =Flux monГ©taires opГ©rationnel (CFO) Plus : IntГ©rГЄts x (1– taux d'imposition) Moins :
Investissement en immobilisations 25 PrГ©parГ© par FranГ§ois Boudreau 29/09/2010 7.3 Calculer le FCFE Г partir du FCFF Le FCFE est le flux
monГ©taire disponible aux actionnaires ordinaires – le flux monГ©taire qui reste une fois les dГ©penses opГ©rationnelles

Satyam : India 's Biggest Corporate Scandal
Executive Summary Incorporated in 1987, Satyam Computer Services Limited (a foreign private issuer) was India's fourth largest IT company that
operated in 65 countries around the world, including 9 offices in the United States. It had American Depository Shares traded on the New York Stock
Exchange during the fraud period (2003–2008) and changed its name to Sify Technologies Limited in October 2007. Now, Satyam has a new senior
management team consisting of members formerly associated with Tech Mahindra Ltd and has replaced all board members that were in place during
the fraud period. Satyam's fraud is known as "India's Enron" because it was India's biggest corporate scandal. Unlike Enron's agency problem, Satyam
was brought down due to executives "tunneling." Tunneling is the transfer of assets and profits out of firms for the benefit of those who control them.
The company had large cash assets, but promoters still controlled it with a small percent of shares (less than 3%). Also, Satyam attempted to absorb a
real–estate company in which they had a majority stake. This was a deadly combination that pointed to tunneling. The Satyam scandal highlights the
importance of securities laws and corporate governance in emerging markets. Background Information When analyzing Satyam's competitive
environment, the first aspect we considered was rivalry among existing firms. Satyam listed in their financial statements that their main competitors
included Bharti Airtel, Tata

Midland Case
1. Do you think Mercury is an appropriate target for AGI? Why or why not? Mercury is an appropriate target for AGI. AGI is looking to increase its
revenue and profit by utilizing synergies. The initial aim of AGI for acquiring Mercury Athletics is to increase leverage with contract manufacturers
and to boost the cooperation with the retailers and distributors. AGI was one of the most profitable and successful companies in the market segment,
but the firm's size remained rather small in comparison with the main competitors. Therefore, with the acquisition of Mercury, AGI planned to build
competitive advantage. Besides, the target company had well developed operation infrastructure, impressive labor facilities in China and numerous...
Show more content on Helpwriting.net ...
All forecasts shown below, net operating profit after tax (NOPAT) for 2007 to 2011 was derived by subtracting corporate tax from forecasted
operating income (tax rate is assumed to be 40%). Forecasted FCF for 2007 to 2011 were calculated after subtracting capital expenditures and
changes in working capital from NOPAT and adding depreciation. The FCFs will be used to assess the firm's PV. 3. Estimate the value of Mercury
using a discounted cash flow (DCF) approach and Liedtke's base case projections. Justify any additional assumptions that you make. In answering this
question you should provide a quantitative and detailed analysis of the following parts of the valuation: a. Projected cash flows, including projected
capital expenditures and changes in net working capital. b. The appropriate discount rate (assume a market risk premium of 5.0%). c. Various
approaches to terminal value (growing perpetuity and multiples–based). d. Sensitivity analysis of the parameters you consider most relevant. a) Cash
Flow Forecasts Segmented: Men's Athletic:| 2007| 2008| 2009| 2010| 2011| Revenue| 251,957| 282,192| 310,411| 335,244| 352,006| Less: Operating
Expenses| 218,435| 244,647| 269,112| 290,641| 305,173| Operating Income| 33,522| 37,545| 41,299| 44,603| 46,834| | | | | | | Men's Casual:| | | | | |
Revenue| 52,179| 53,223| 54,287

D'Leon Case
D' Leon Inc., Case part I
Jayline Benitez
Alexander J. Uribe
MGM 6620 Managerial Finances
Juan M. Ramirez
Polytechnic University of Puerto Rico
Abstract – Donna Jamison, a 1995 graduate of the University of Florida with four years of banking experience, was recently brought in as an
assistance to the Chairman of the board of D'Leon Inc., a small food producer that operates in north Florida and whose specialty high–quality pecan
and other nut product sold in the snack–food market. D'Leon's president, Al Watkins, decided in 1999 to undertake a major expansion and to "go
national" in competition with Frito–Lay, Eagle, and other major snack–food companies. Watkins felt that D'Leon's products were of a higher quality
than the ... Show more content on Helpwriting.net ...
It can be concluded that the expansion has decreased MVA because one can see the reduction in thestock price by over 73%.
% of decrease or increase = ($8.50 – $2.25) / $8.50 = 73.53%
d) D' Leon purchases material on 30–day terms, meaning that it is supposed to pay for purchase within 30 days of receipt. Judging from its 2005
balance sheet, do you think D' Leon pays suppliers on time? Explain. If not, what problems might this lead to?
The Company records indicate that they did not pay their suppliers on time. Also the accounts payable balance swelled by 260% from yester annum,
however the sales managed to pull up only 76%. The company is jeopardizing its relationship with the suppliers, this can lead the suppliers to cut off the
company and put it into bankruptcy against the Company if the company continues with late the payments.
e) D' Leon spends money for labor, materials, and fixed assets (depreciation) to make products, and still more money to sell those products. Then, it
makes sales that result is receivables, which eventually result in cash inflows. Does it appear that D' Leon's sales price exceeds its cost per unit sold?
How does this affect the cash balance?

No, it does not appear that D' Leon's sales price exceeds its cost

FIN680 CASE 43
FIN 680
Case 43: Flinder Valves & Controls (FVC)
Group 3
Pengfei Yang
An Wan
Zhiyu Rhen
Ricardo Reilova
Case 43: Flinder Valves & Controls Inc.
Case Summary:
I. Developments so far...
Bill Fender, president of Flinder Valves & Controls Inc. (FVC) and Tom Eliot, CEO of RSE International are trying to determine final details on RSE
acquisition of FVC. Formal conversation have been going–on for approximately 3 months. During this time they and their respective advisors have:
Discussed broad motives and benefits of the merger
Discussed management issues
Governance issues
Executive compensation
No–lay–off for employees
Recent analyst predictions of: "Difficult/challenging borrowing conditions and restrictions in the US, warning ... Show more content on Helpwriting.net
...
In the agreement FVC would become a subsidiary of RSE, and would maintain its identity and management staff, furthermore no lay–offs of staff are
expected or desired. RSE believes FVC's personal brings in a significant intangible asset to their company and want to preserve it.
To this effect, they are looking to keep Flinder (62 years old) as CEO of the new subsidiary with a potential salary increase of between $50,000 and
$200,000 per year. This RSE hopes will be enough incentive to keep Flinder from retiring and overseeing the training of his eventual replacement. The
only remaining issues are:

Price of the deal:
FVC is traded in NASDAQ while RSE is traded in the American Stock Exchange
Market CAP for both companies are FVC $100M and RSE $1.4B
Recent rapid growth over competitors/market segment despite weakened economy has both companies feeling their stocks are undervalued.
Method of settlement: Cash, Stock a combination of both, etc.
RSE has sufficient credit capacity to finance the purchase through debt
Auden Co. who holds 20% of FVC stock has signaled they will not opposed the acquisition but will sell their stock.
What is a reasonable offer price for FVC?
RSE want to make a reasonable offer price for FVC and they need to know FVC's corporate Value. So we need to calculate WACC first. We can found
Flinder's Equity from Exhibit 1 which is 36764. And Debt equal Total

Essay on Stock Market and Paramount
Case Study Questions –Paramount Communications Inc. 1993–
Why a paramount is a takeover target?
Several Strategic Reasons
– Cost reduction: through combinations of similar business and economy of scales
– Sales increase: a) cross–promotions of each company's brand and utilization of each company's channels, and b) cooperation in international
businesses.
2. Which of the two firms (Viacom or QVC) would make a better fit with Paramount?
–Viacom: Overlap in the business creates synergies regarding cost and revenue. However, cannibalisation may happen in the near future.
–QVC: Small rooms for synergies (cost reductions may be limited to non–business section.). Volatility may high regarding the realisation of... Show
more content on Helpwriting.net ...
5. What is Paramount worth to Viacom?
– Theme park (cross–selling)
– Film Library/Film Distribution Business
6. What is Paramount worth to QVC?
– New business opportunities in Entertainment
– Film Library/Film Distribution Business
7. Compare your valuation with Smith Barney's. What assumptions do you have to make to get the terminal value EBITDA multiples used by Smith
Barney. Is there any benefit of their method relative to FCF method?
Smith Barney is using EBITDA of 14 to 16X. Since EBITDA multiple tends to revert to a certain level over the year, we need to assume that the

market will keep pricing the company at the same level of 1993.
The merits of EBITDA multiples:
–They don't need to assume the perpetual growth rate which is hard to calibrate but has substantial impact on pricing.
–They can ignore the capital structure change
–Easier to understand (it is "market consensus")
8. What doe 30% premium suggest? Is it reasonable?
30% of premium over the market price may be reasonable given;
a) control premium
b) the nature of takeover (it can be considered as "Insider Trading", and to avoid litigation by shareholders, an acquirer may need to pay premium)
c) consideration of synergies through a takeover.
9. How should Redstone proceed? What price should he offer? Should the offer be a cash offer, astock offer, or

Dwe Fdbdfgb Dfbdfhgsfbhdsf
1. Do you think Mercury is an appropriate target for AGI? Why or why not?
Mercury is an appropriate target for AGI. AGI is looking to increase its revenue and profit by utilizing synergies. The initial aim of AGI for acquiring
Mercury Athletics is to increase leverage with contract manufacturers and to boost the cooperation with the retailers and distributors. AGI was one of
the most profitable and successful companies in the market segment, but the firm's size remained rather small in comparison with the main
competitors. Therefore, with the acquisition of Mercury, AGI planned to build competitive advantage. Besides, the target company had well developed
operation infrastructure, impressive labor facilities in China and numerous ... Show more content on Helpwriting.net ...
|0
|0
|0
|0
|
Operating Income | –463 | 0
|0
|0
|0
|

||||||
Consolidated Revenue 570,319 | 597,717 |
| 479,329
| 489,028
| 532,137
|
Less: Operating Expenses | 423,836 498,535 | 522,522 |
| 427,333
| 465,110
|
Less: Corporate Overhead | 8,487 10,098 | 10,583 |
| 8,659
| 9,422
|
Consolidated Operating Income | 61,686 | 64,612 |
| 47,006
| 53,036
|

57,605
||||||
Estimated Capital Expenditures | 14,258 | 14,943 |
| 11,983
| 12,226
|
13,303
Estimated Depreciation 11,406 | 11,954 |
| 9,587
| 9,781
| 10,643
|
Combined:
Operating Results: | 2007 | 2008 | 2009 | 2010 | 2011 |
Revenue
| 479,329 | 489,028 | 532,137 | 570,319 | 597,717 |
Less: Divisional Operating Expenses 498,535 | 522,522 |

| 423,837 | 427,333 | 465,110 |
Less: Corporate Overhead | 8,487 | 8,659 | 9,422 | 10,098 | 10,583 |
EBIT | 47,005 | 53,036 | 57,605 | 61,686 | 64,612 |
Less: Taxes | 18,802 | 21,214 | 23,042 | 24,675 | 25,845 |
NOPAT
| 28,203 | 31,822 | 34,563 | 37,012 | 38,767 |
Plus: Depreciation | 9,587 | 9,781 | 10,643 | 11,406 | 11,954 |
Less: Changes in Working Capital | 4,567 | 2,649 | 9,805 | 8,687 | 6,233 |
Less: Capital Expenditures | 11,983 | 12,226 | 13,303 | 14,258 | 14,943 |
Less: Change in Other Assets
|0|0|0|0|0|
Plus: Changes in Other Liabilities | 0 | 0 | 0 | 0 | 0 |
Unlevered Free Cash Flow (FCF) 29,545 |
| 21,240 |

Cash Flow and Risk Free Asset Essay
1. A company needs to elect 10 directors. A shareholder owns 80 shares. What is the maximum number of votes that he or she can cast for a favorite
candidate under (10 points)
a. Straight voting? 80
b. Cumulative voting? 80*10 = 800
2. "If the efficient–market hypothesis is true, the pension fund manager might as well select a portfolio by throwing darts at the Wall Street Journal."
Explain why this is not so. (10 points) This strategy does not consider risk.
3. The NuPress Valet Company has an improved version of its hotel stand. The investment cost is expected to be 72 million dollars and will return
13.50 million dollars for 5 years in net cash flows. The ratio of debt to equity is 1 to 1. The cost of equity is 13%, the ... Show more content on
Helpwriting.net ...
Let PV = 2000, n=5, I=16%, PMT=? = 610.82=OCF; Substituting above find Q=2519.
6. Use the probability distribution to answer the following questions: (30 points) Return onReturn on
StateProbSecurity ASecurity BBoom.615%8%Bust.45%20%Expected Return11%12.8%Standard Deviation4.9%5.88%
a. What is the expected return on Security B? 12.8%
b. What is the expected return on a portfolio that is 40% invested in A and 60% invested in B? 12.08%
c. What is the standard deviation of Security A? 4.9%
d. What is the expected return on a portfolio that is equally split among A, B and the risk free asset? The expected return on the risk free asset is 4%.
9.27%
(11+12.8+4)/3
e. What is the covariance between A and B?–28.8%%
Cov = .6(15–11)(8–12.8)+.4(5–11)(20–12.8)
f. What is the standard deviation of a portfolio with weights of .25 in security A and the remainder in security B? 3.2%
Portfolio Standard Deviation = .252(4.9)2+.752(5.88)2+2*.25*.75*(–28.8)
Or = .6(9.75–12.35)2+.4(16.25–12.35)2

7. You are evaluating a project for The Ultimate recreational tennis racket. You estimate the sales price of The Ultimate to be $400 and sales volume
to be 1,000 units in year 1, 1,250 units in year 2, and 1,325 units in year 3. The project has a 3–year life. Variablecosts amount to $225 per unit and
fixed costs are $100,000 per year. The project requires an initial investment of $165,000, which is depreciated

Balance Sheet and Free Cash Flows
Star River Electronics Ltd.
Team 14
Constantine Brocoum
Courtney Delia
Stephanie Doherty
David Dubois
Radu Oprea
December 19th, 2009
Contents
Objectives1
Management Summary1
Financial Health1
Financial Forecast for 2002 and 20033
Key Driver Assumptions5
Star River WACC5
Free Cash Flows of the Packaging Machine Investment7
Appendices7
i.
Objectives
This report seeks to answer the following five questions about Star River Electronics Ltd.: 1. Assess the current financial health and recent financial
performance of the company. What strengths and/or weaknesses would you highlight to Adeline Koh? 2. Forecast the firm's financial statements for
2002 and 2003. What will be the external financing ... Show more content on Helpwriting.net ...
The company needs an infusion of capital in order to maintain the actual growth rate.
It is unlikely the firm would recover unless inventories are reduced, especially in the context of weakened demand for CD–ROMs and the associated

risk of having to deeply discount or even write them off.
Another item to correct is the Production costs and expenses, currently running at 50% of the revenue. The management has expressed concerns with
outdated packaging equipment and the use of the more expensive second and third shift to catch up with production. An investment here would
probably turn profitable in the context of healthy sale numbers.
Key Driver Assumptions
Sales is one of the major key driver assumptions because so many assumptions are based on a percentage of sales. As sales increases, so do production
costs, admin and selling expenses, accounts receivable and inventories. Koh assumes that a 15% year over year growth is expected. This is a risky
assumption since the market is moving away from cd technology to dvd technology. Star River has little capacity to support future dvd demand without
taking on additional manufacturing investments.
Inventories are a staggering 60% of sales and are full of soon to obsolete inventory. It is possible that this inventory of cds will not be able to be sold
at full retail value with the growth of the dvd market. Perhaps more important to the current financial outlook, as

Free Cash Flow and Corporate Valuation Model
Assignment Chapter 15
True/False
Indicate whether the statement is true or false.
_F___1.The corporate valuation model cannot be used unless a company doesn 't pay dividends.
_T___2.Free cash flows should be discounted at the firm 's weighted average cost of capital to find the value of its operations.
_F___3.Value–based management focuses on sales growth, profitability, capital requirements, the weighted average cost of capital, and the dividend
growth rate.
_F___4.Two important issues in corporate governance are (1) the rules that cover the board 's ability to fire the CEO and (2) the rules that cover the
CEO 's ability to remove members of the board.
_F___5.If a company 's expected return on ... Show more content on Helpwriting.net ...
If the weighted average cost of capital is 15%, what is the firm 's value of operations, in millions? a.| $948| b.| $998| c.| $1,050| d.| $1,103| e.| $1,158|
____16.Suppose Leonard, Nixon, & Shull Corporation 's projected free cash flow for next year is $100,000, and FCF is expected to grow at a
constant rate of 6%. If the company 's weighted average cost of capital is 11%, what is the value of its operations? a.| $1,714,750| b.| $1,805,000| c.|
$1,900,000| d.| $2,000,000| e.| $2,100,000|
____17.Zhdanov Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be –$10 million, but its FCF at t = 2 will be $20 million.
After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, what is the firm 's value of
operations, in millions? a.| $158| b.| $167| c.| $175| d.| $184| e.| $193|
____18.Leak Inc. forecasts the free cash flows (in millions) shown below. If the weighted average cost of capital is 11% and FCF is expected to grow

at a rate of 5% after Year 2, what is the Year 0 value of operations, in millions? Assume that the ROIC is expected to remain constant in Year 2 and
beyond (and do not make any half–year adjustments).
Year:| 1| 2| Free cash flow:| –$50| $100|
a.| $1,456| b.| $1,529| c.| $1,606| d.| $1,686| e.| $1,770|
____19.A

Free Cash Flow and Butler
Introduction Butler Capital Partners (Butler) is an investment fund founded in 1990. Butler closed its first private equity fund, European Strategic
Fund, in 1991. This first fund was mainly focusing on small family owned enterprises and on divisions of larger companies. Mainly of his first
success he closed in 1998 his second fund, Private Equity II, and Butler became one of the largest independent funds in France. With his second fund
he would focus on investments in France on a larger scale. On April 29, 1999, a new investment opportunity arose for Butler: Autodistribution (AD).
AD is an entrepreneurial firm and has become the largest independent automotive parts wholesaler in France by the end of the 1990s. This report starts
... Show more content on Helpwriting.net ...
Butler found some important development opportunities for AD: (1) an increase in penetration rate of AD 's CBU among the affiliates by setting up
an efficient IT system for purchasing, (2) external growth opportunities in France by integration of affiliates or acquisitions of independent
wholesalers, (3) expansion opportunities in Europe provided by the fragmentation of the industry, (4) low competition on acquisitions because of the
lack of players able to afford a dynamic build–up strategy, (5) strong growth potential of industrial supplies segment and (6) potential of development
of fleet maintenance and agreements with insurance companies. These opportunities will result in an increase in gross margins through acquisition of
independent wholesalers and integration of affiliated wholesalers. Furthermore, a reduction of operation costs can be the result, because of the IT
system. With the existence of an efficient IT system, the margins can be improved or the prices can be cut and these effects are even stronger with
consolidation / expanding in the European market. Besides these opportunities there is an opportunity for an e–business market. Butler stated this as
В‘one edge over the competitors '. Thus by expanding the business (through e–business, acquisitions, integration) and making use of the new
technology systems, AD could realize significant margin improvement. These high margin improvements are expected to increase from 32.3% in 1999
to

Finance: Free Cash Flow
inance COOPERATE FINANCE| Miss Afifa| | Assignment# 4| | UMAIR ASIF11 March 2013|
You submitted this Assignment on Sun 10 Mar 2013 7:21 PM PDT. You got a score of 85.00 out of 100.00. You can attempt again, if you 'd like.
Top of Form
Please read all questions and instructions carefully. Note that you only need to enter answers in terms of numbers and without any symbols (including
$, %, commas, etc.). Enter all dollars without decimals and all interest rates in percentage with up to two decimals. Read the syllabus for examples.The
points for each question are listed in parentheses at the start of the question, and the total points for the entire assignment adds up to 100. You are
strongly encouraged to use ... Show more content on Helpwriting.net ...
Question 5
(5 points) To get from net operating profits after tax (NOPAT) to free cash flows (FCF), you need to ADD back depreciation, SUBTRACT capital
expenditures and ADD net working capital (i.e., current operating assets – current operating liabilities). (Free cash flow is another name for cash flows.)
Your Answer| | Score| Explanation| False.| вњ”| 5.00| Correct. You understand the nature of "capital."| True.| | | | Total| | 5.00 / 5.00| |
Question Explanation
This is an important issue that makes you focus on differences between stocks and flows.
Question 6
(5 points) Last year your firm had revenue of $20 million, cost of goods sold (COGS) of $12 million, Selling, General, & Administration costs
(SG&A) of $2 million, Account Receivables (AR) of $6 million, Account Payables (AP) of $4 million andInventory of $4 million. What will be
the free cash flow next/this year if you boost revenue 6% and AR 12%, while holding COGS growth to 3% and everything else remains the same as
last year? (Assume no taxes and no new capital expenditures.) (You are encouraged to use a spreadsheet even for this specific type of question.) Your
Answer| | Score| Explanation| 4170000| вњ | 0.00| Review the basics; see template and references.| 6120000| | | | 7240000| | | | 5250000|

The Product Of Apple Inc.
вћўIntroduction:
The phone starts ringing, we 're going to pick it up and when we touch it, the ringer volume smartly goes down! Yes! Today a company like Apple
could make this kind of cellphone. To complicate the landscape, the smartphone is not the only device at stake; tablets and eBook readers are
emerging as key components of the mobile universe. Apple is a big company with several products and services that provide along with products. Each
product has its own market. It is possible to use multiple factors and combine related statistics for analyzing a company with different product.
Steve Jobs established Apple Inc. in year 1977. It went public in year 1980 with Initial Public Offering (IPO) of US $ 22.00 per share price. It is ...
They are market leaders even when it comes to software's and online market. They started the world's first App store and now it is having more tan 1
Billion Apps in their store.
вћўDefinitions:
1. Free Cash Flow to the Firm (FCFF) is the financial measure of the total amount of cash is generated within the firm or company after the deduction
of the expenses, taxes and changes in net working capital and investments. In having a positive free cash flow to the firm, it does indicate a health
financial base for the firm as it still has extra cash that can be used for further investment both in long and short term investment.
2. Free Cash Flow To Equity – (FCFE); This is a measurement of how much cash the firm still has on hand to be able to pay the equity of shareholders
who have invested within the company after all the expenses, reinvestment and debt repayment. In which a positive free cash flow to equity will
increase more interest of shareholders to invest within the company since the company has a better management with the cash and resources.
3. Market Value Added– (MVA) A calculation that shows how much the shareholders value has been added within the company as its calculated by
having the difference between the market value of the company and the capital contributed by the shareholders within the company. As it does have a
great company role on showing how the company has used the investment capital since when the company started to the present,

UST CASE STUDY
1. Assess the business and financial risks of UST
Business risks are relatively low:
Main risk is that UST has undiversified business, it basically relies on one product
However its main product is noncyclical, it carries little systematic risk
Imminent increase in excise tax on smokeless tobacco (however, tobacco demand is considerably inelastic)
It is the (sub)industry leader (market share >85%), industry is an oligopoly which implies high barriers for potential competitors to enter the market
Financial risks are even lower:
Cash flows are constantly increasing
Profit margins are high
Outperforms comparable firms
No leverage
Forecasts are positive
2. What are the benefits of debt in UST's case?
Debt tax shield: increase ... Show more content on Helpwriting.net ...
At each debt level, estimate the benefits of debt. Also, for each debt level, do a back–of–the–envelope calculation of how big the value lost in financial
distress has to be for that debt level to be optimal for the firm. You can do this by estimating the costs of financial distress crudely as:
In order to find the benefits of debt, one needs to calculate the effective tax rate, given by:
Where: П„c is the corporate tax rate П„d is the tax rate for income from dividends П„e is the tax rate on equity income: П„e = (dividend payout
ratio)(П„div) + (1 – dividend payout ratio)(П„cg) П„cg is the tax rate on capital gains П„div is the tax rate for income dividends
Bond default probabilities:

Bond Rating
P(default)
AAA
0.00%
AA
0.47%
A
0.14%
BBB
0.18%
BB
0.37%
B
2.42%
CCC
7.20%
6. UST Inc. has paid uninterrupted dividends since 1912. Will a recapitalization (issuing debt and buying back equity with the proceeds) hamper future
dividend payments?
In order to check what happens to dividends per share, we need to examine the effect of leverage on the number of shares
The new number of shares outstanding will be equal to the older number of

FIN553 Penelope Case Group 2 Essay
FIN553 Advanced Coporate Finance
Case Study: Penelope's Personal Pocket Phones
Group 2
Brian Erber, Jaime Carreno, Wenliang Zhang, Xue Liu
(Introduction) Background info about the project.
In order to evaluate the NPV of the first–generation phone (project) ignoring the possibility of investing in the second–generation phone (project), we
projected the free cash flows (FCF) of the first–generation phone through 2001 to 2006. The total FCF was calculated as EBIT plus deprecation and
subtract any capital expenditures along with change in net working capital. With risk–free rate of 10%, comparable firms' beta of 1.2, and market
premium of 4%, the appropriate discount rate for the project was 14.8% using CAPM. Sum ... Show more content on Helpwriting.net ...
The third scenario was ignoring the option to invest in the second–generation project and selling the equipment in year 2. We evaluated this option as
a put option. First, we calculated the probabilities for going up and down based on the assumption of a risk neutral word. As a result, the probability
of going upward is calculated as 0.3375 and downward probability is 0.6625. In order to determine the present value of all the sequence cash flow at
the end of year 2, we calculated the upside change rate and downside change rate as 64.87% and –39.35%, respectfully. The next step is to analyze the
option value by using the "Binomial Tree" method. In order to determine the present value of all the subsequence cash flow at the end of year 2,
we calculated the cash flow at each node on the tree, until 2006. We discounted all the cash flow at the risk free rate at 10%. The End of Year NPV
of all the subsequence cash flow at Year 2 is calculated as $7,571,752, and the selling price of the equipment at end of 2 is $4,000,000, which is the
salvage value. We found the NPV of selling the machine at end of Year 2 to be–$2,951,861 as of Year 0, which is negative. The APV of the project
after adding the option turned out to be –$6,321,932. This negative APV suggest that the

Horniman Horticulture
Background
Horniman Horticulture is a whole–sale nursery business that has been owned by Maggie and Bob for three years. They have seen an increase in
business and number of plants grown at the nursery and are expecting demand to continue to grow. In 2005, the business's profit margin was expected
to grow to 5.8% up from 3.1% in 2003. This projected growth seems accurate considering Maggie's conservative approach with the companies cash
balance. Handling the finances, Maggie dislikes debt financing because of her fear of holding too much inventory and thus not being able to make
interest payments. Since the business relies on good weather conditions with some mature plants taking years to grow, severe weather can destroy this
inventory. ... Show more content on Helpwriting.net ...
Past 2004, net working capital in 2005 was $97,200 which is 1.6x the net income of $60,800. If they continue to increase their net working capital like
they have in the past, the projected net working capital for 2006 would be –$235,900 which would cause them a negative cash balance of –193,000.
When you look at the balance sheet in Exhibit B we can see that the current assets have increased 19% and total assets increased 14.4%. This is due
primarily to the increase in inventory and accounts receivable. In the four years from 2002 to 2005 inventory has increased 8.7% and accounts
receivable has increased 16.4%. Due to this, the cash balance has decreased from $120,100 all the way down to $9,400. In addition in 2005, the cash
balance went below their comfort level of $10,000 down to $9,400. This is not meeting their expectation of their 8% minimum of total revenue target.
Financial Ratio Analysis Even though their business was growing significantly, and they were experiencing a steady increase in revenues, they were
seeing a huge decrease in their cash. The reason for this is because of their recent change to an increase in business from small nurseries. By looking
at the financial ratios, even though they are increasing in sales, you can tell that they are relaxed on their accounts receivable and credit terms. Each
year it takes them longer to collect their money. This is due to the fact that the carrying cost of inventory is harder for the

Ford Motor Vep
Corporate Finance Case Study 1
Butler Lumber Company
зЋ‹й‡‘ж Ћ 1101289036
жќњй›Єе·ќ1101289033
жќњй‡‘й№Џ 1101289039
е‘Ё жќЁ 1101289040
Abstract
In this report, we study the case of Butler Lumber Company and analyze the financing problem it was confronted. In the first part, we give a brief
description of the company, including the development process, equity structure, several important financial ratios which shows the basic conditions of
the firm. Then we talk about the dilemma the company was facing and give some questions concerned that will be worked out in the later analysis.
In the second part, all of the company's financial ratios are taken into consideration in order to analyze the financial condition. At first we will discuss
the company's ... Show more content on Helpwriting.net ...
1.3 A Glance at Significant Resumes & Facts
Here we list several important facts found in the main body of the case for further use in the later analysis. 1) Despite the rapid growth in its
business , positive expect in sales in the future and good profits, the company had experienced a shortage of cash to expand business. 2) The
company's current maximum loan was as much as $250,000 with SN Bank with the request of securing with its real property. 3) The NN bank might
extend a line of credit to BLC up to amount of $465,000 at an interest rate of prime plus 2%. 4) BLC obtained rapid increase in sales during 1989 –
1991. 5) The six months of April to September accounted for 55% of annual sales. 6) No sales representatives were employed, and orders were taken
by phone. 7) MB had not wasted his money in disproportionate plant investment. 8) MB gave attention to control his operating expenses, had personal
control over every feature of his business and had little to offer in security for the loan. 9) The NN bank gave attention to the debt position and current
ratio of business, and expected to reach sales of $3.6 million in 1991 10) The supplier provided for a discount of 2% for payments made within 10 days
of the invoice date. 11) During the last 2 years MB had taken very few purchase discounts because of the shortage of funds. 12)

Ocean Carriers Case
The Charles H. Kellstadt Graduate School of Business DePaul University FIN 555: Financial Management Prof. Randy Fisher Case Study
Questions: Ocean Carriers These questions relate to the Ocean Carriers case in your course packet. You can find the data for this case on the course
website in a spreadsheet named: Ocean Carriers Exhibits.xls. This case provides the opportunity to make a capital budgeting decision by using
discounted cash flow analysis to make an investment and corporate policy decision. Ocean Carriers is a shipping company evaluating a proposed
lease of a ship for a three–year period beginning in 2003. The proposed leasing contract offers very attractive terms, but no ship in Ocean Carrier's
current fleet meets... Show more content on Helpwriting.net ...
How are your results affected? What do you conclude? Useful Hints: a. You need to be consistent in the treatment of the timing of the cash flows in
your analysis. To accomplish this, you should assume that all cash flows occur at the end of the year closest to the actual date of the cash flow, so
for example if the case states that a cash flow occur in "January" or "early" in a specific year, you should assume that it occurs on Dec–31 of the
previous year. This is what makes most sense from a financial perspective, as the Present Value of a cash flow will be almost exactly the same
whether it occurred on Dec–31 in one particular year, or Jan–1 the following year, as those two dates are just one day apart. (When there is no
mentioning in the case of when within a certain year a cash flow occurs, assume that it occurs at the end of the year.) b. As stated in the case, you
should assume that operating costs will grow annually at 1% in real terms. You should however be consistently using nominal cash flows while making
the cash flow projections. c. Assume that Ocean Carriers has a sufficiently high taxable income in each year so that any tax shields can be used
immediately. d. Assume that the ship is depreciated straight–line for 25 years to a remaining book value of

Fianance
INSTITUTE OF BUSINESS MANAGEMENT
Course : Financial Management
Prog : BBA (H)
Faculty : Sanam Taimoor
–––––––––––––––––––––––––––––––––––––––––––––––––
Group Members: Huda A. S. Qureshi (9930) Javeria Khalid(9937) Saad Anjum(9977)
Topic: Assignment 1
Announced Date: Wed, 25–01–2012
Due Date : Wed, 01–02–2012
Ratios to be Calculated * Net Operating Working Capital * Total Working Capital * Net Operating Profit after Taxes * Free Cash Flows * Market
Value Added
Net Operating Working Capital = Current Assets– Current Liabilities Rupee (000)| 2011| 2010| 2009| Current Assets| 3262718| 1779477| 2143328|
Current Liabilities| ... Show more content on Helpwriting.net ...
From 2009–2010 their liquidity decreased while from 2010–2011 it increased. The negative amount of liability shows that they have paid more than
they were required to pay. The company's accounts payable staff can use to offset future payments to suppliers. So they could have done this to ensure
that they get the resources required by them from the supplier in the future and there will be no need to pay for it and they won't have any liability at
that time. Positive working capital means that the company is able to pay off its short–term liabilities.
Total Working Capital
While in Total Working Capital has decreased from 2009–2010 while in 2010–2011 period the total working capital has increased showing the
company's sustainability. Companies that have a lot of working capital will be more successful since they can expand and improve their operations.
NOPAT
NOPAT is decreasing from 2009
–1010 and furthermore from 2010–2011 which shows that the company's profit after taxes are reducing. It also means
that Sitara chemicals is generating less amount of profit if it has no debt and held no financial assets and held only operating assets. It is a more

accurate look at operating efficiency for leveraged companies. It does not include the tax savings many companies get because they have existing debt.
Free cash flow
Free cash flows of Sitara chemicals have decreased from 2009–2010 which shows that the cash,

Free Cash Flow, Issuance Costs, And Macroeconomics Risk
Free Cash Flow, Issuance Costs, and Macroeconomics
Risk
Qiaozhi Hu
Questrom School of Business
Boston University
June 30, 2015
I thank Dirk Hackbarth, Andrew Lyasoand MF930 participants at Boston University for helpful comments.
Send correspondence to Qiaozhi Hu, Boston University Questrom School of Business, 595 Commonwealth Ave,
Boston, MA 02215, USA; telephone: (732)809–1105. E–mail: qiaozhih@bu.edu.
1
Free Cash Flow, Issuance Costs, and Macroeconomics Risk
Abstract
This research proposal develops a dynamic framework analyzing the impact of macroeconomic conditions on dividend policy, equity issuance policy,
stock prices and agency costs of free cash ow. I begin by observing that both equity issuance and agency costs both depend on the aggregate state of
economy. However, the existing literature is silent on the stock price dynamics and agency costs of free cash ow in the presence of
macroeconomics risk, issuance and agency costs. I then describe the expected results: (1) Characterizing the rm 's optimal equity issuance and
dividend pay out policies in dierent regimes; (2) Study on the stock price and asymmetric volatility under the optimal cash management policies in
the presence of macroeconomic risk; (3) The model would probably predict free cash ow problem is more severe in expansion regime than that in
contraction regime. A literature review is added to talk about the prior research in the related areas. I also analyze the rst–best benchmark case where

Case Study Atlantic Corporation Essay examples
Project Genesis| Atlantic Corporation| ACE Consulting Group| "A service we provide with excellence" |
––––––––––––––––––––––––––––––––––––––––––––––––– Executive Summary The purpose of this report is to assess the viability of the
acquisition of Royal Paper Corporation's (Royal) Monticello mill and box plants by Atlantic Corporation (Atlantic). This will be conducted through the
evaluation and analysis of whether this project is profitable and also if this is a sound strategic move. In making our final decision, we have undertaken
extensive qualitative and quantitative analysis. Such factors we have taken into consideration are the future trend of linerboard prices, the... Show more
content on Helpwriting.net ...
Moreover, this further supports our recommendation for Atlantic to proceed with this acquisition as it will obtain one of the best mills for a cheap
initial cost ($319m compared to the construction cost of $750m). Will Atlantic–Royal's combined linerboard and box mill operations be better or worse
than the industry overall. Atlantic's forest product industry is very much tied to the performance of the overall economy, in particularly to changes in
interest rate fluctuations. In contrast, the fortunes of the linerboard industry is more protected from the adverse impact of interest rate instabilities and
swings in economic activity, and better controlled to gain significant advantages from the upsurge in economic activity. Currently Atlantic's existing
Ohio linerboard mill produces 780 tons per day of linerboard, which represents a mere 1.8% of the nation's linerboard capacity. This is far below the
150,000 tons of linerboard that Atlantic purchases every year from its competitors. Consequently, with such a tight market, linerboard could either
become unavailable or available at very expensive prices. If Atlantic pursues their acquisition strategy in purchasing the linerboard mills from Royal,
this could help greatly in strengthening Atlantic's linerboard capacity and ensure to retain their box plants profits. With Royal's current Monticello mill
producing kraft paper and linerboard, this would require $140.8 million to convert all of the mill's kraft capacity to

Financial Analysis for Ralph Lauren Corporation Essay example
Abstract
Ralph Lauren Corporation (NYSE:RL) is well known in the apparel clothing field. The corporation engages in the design, marketing and distribution of
lifestyle product. This analysis paper will illustrate the current financial situation and forecast the future free cash flow based on the previous financial
statement and financial data collected. These information and forecast are served for the potential investor to have a general understanding of RL
Corporation and make the right choice on their money.
Financial Analysis for Ralph Lauren Corporation
Ralph Lauren, an American designer, established the brand Polo Ralph Lauren in 1967. At first, Ralph Lauren's collection was... Show more content on
Helpwriting.net ...
As the creditors' view, they prefer the high current ratio. The current ratio provides the best single indicator of the extent, which assets that are
expected to be converted to cash fairly quickly cover the claims of short–term creditors. However, consider the current ratio from the perspective of a
shareholder. A high current ratio could mean that the company has a lot of money tied up in nonproductive assets.
The return on equity, ROE, is as high as 20.69% (above 15%). It illustrate that the RL Corporation uses the investors' money pretty effectively. As of
return of assets, equals to 13.10%, which reveals how much profit a company earns for every dollar of its assets. Both ROE and ROA for RL
Corporation seems really good and they provide a picture that managers are doing a good job of generating return from shareholders' investments.
The current financial performance is pretty optimistic for RL Corporation. At the same time, we also need to forecast the future financial data after
2012. To forecast the futurefree cash flow, only the internal employees can get the real and accurate information and ratios. As an external observer,
we usually analyze the linear relation between the cost of capital and growth rate, considered as the constant growth model. First of all, we need find
the WACC,Weighted Average Cost of Capital
. The weighted average of the after–tax

First Motor Case
Global Perspectives on Accounting Education Volume 5, 2008, 17
–25
FIRST MOTORS CORPORATION: A CLASSROOM CASE ON IMPAIRMENTS
Tim Krumwiede College of Business Bryant University Smithfield, Rhode Island USA Emily Giannini Graduate Student, College of Business Bryant
University Smithfield, Rhode Island USA ABSTRACT This case requires a detailed analysis of impairments of both long–lived assets and goodwill for
First Motors Corporation, a fictitious automobile company. By integrating multiple issues into this case, students are presented with some of the
complexities and interrelationships that are seen in practice. To properly prepare solutions to this case, students must successfully read, interpret, and
apply both accounting standards ... Show more content on Helpwriting.net ...
Each division acts as a component of the enterprise that earns revenues and incurs expenses from engaging in its own business activity. Additionally,
each division is reviewed by the enterprise's chief operating decision maker to assess its performance and each division has its own discrete set of
financial information. At the time of the purchase, Macinaw Motors had three manufacturing plants, all of which are still operating today. Each plant is
used to produce one car model. Plant 1 is located in Irvine, California, where the hydrogen–powered Mankato is produced. Plant 2 is located in
Mishawaka, Indiana, where the hydrogen–powered Sheboygan is produced. Plant 3 is located in Braselton, Georgia, where the gasoline–powered
Spokane is produced. When Macinaw Motors was purchased in 2008, executives at First Motors believed that consumers were still purchasing
gasoline–powered vehicles because their purchase price was still less than that of similarly equipped hybrid–based or hydrogen–based vehicles.
Management of First Motors plans to convert Plant 3 to manufacture a hydrogen–based vehicle at some point in the future. However, for the next
several years, First Motors wants to capitalize on the market for gasolinepowered vehicles and Plant 3 will continue to be used in the production of
gasoline–powered cars. In late 2008, management began retooling Plant 3 of the Macinaw

New Heritage Doll Company Solution
2014,00 2010,00 Revenue Revenue Growth Production Costs Fixed Production Expense (excl depreciation) Variable Production Costs Depreciation
Total Production Costs Selling, General & Administrative Total Operating Expenses 0,00 1250,00 1250,00 575,00 2035,00 152,20 2762,20 1155,00
3917,20 575,00 3403,80 152,20 4131,00 1735,00 5866,00 586,50 4290,60 152,20 5029,30 2102,20 7131,50 598,20 4669,00 152,20 5419,40 2270,30
7689,70 610,10 5078,40 164,40 5852,90 2452,00 8304,90 622,30 5521,30 177,50 6321,10 2648,10 8969,20 634,80 6000,30 191,70 6826,80 2860,00
9686,80 647,50 6518,50 207,10 7373,10 3088,80 10461,90 660,40 7078,80 223,60 7962,80 3335,90 11298,70 673,70 7684,70 241,50 8599,90 3602,80
12202,70 Operating Profit Operating Profit Operating... Show more content on Helpwriting.net ...
11,00 –557,18 2012,00 168,99 2013,00 682,19 2014,00 540,96 2015,00 583,29 2016,00 629,99 2017,00 680,31 2018,00 734,70 2019,00 793,46
2020,00 17202,27 Payback Analysis Cash flows Cumulative cash flow Payback period 5–year Cumulative EBITDA 2010,00 –3020,00 –3020,00
2011,00 –557,18 –3577,18 2012,00 168,99 –3408,20 2013,00 682,19 –2726,01 2014,00 540,96 –2185,05 2015,00 583,29 –1601,76 2016,00 629,99
–971,77 2017,00 680,31 –291,46 2018,00 2019,00 734,70 793,46 443,24 7,40 years 2020,00 17202,27 6522,20 Profitability Index NPV/Initial
Investment 2,37 NOTES: Cash (Net Working Capital) = Minimum Cash Balance as % of Sales x Revenue = 0.03 x 4,500 = 135 Account Receivable
(Net Working Capital) = Days Sales Outstanding / 365 x Revenue = 59.17 / 365 x 4,500 = 729,5 Inventories (Net Working Capital) = Total Production
Costs / Inventory Turnover = 2762,20 / 7.68 = 359.7 Accounts Payable (Net Working Capital) = Days Payable Outstanding / 365 x (Total Production
Expenses – Depreciation) = 30.76 / 365 x (3917.20 – 152.20) = 317.3 Corporate tax rate, t = 40% EBIT = Operating Profit –2,8 mean std dev 0,00913
0,16402 –0,459256 2010 Revenue Revenue Growth Production Costs Fixed Production Expense (excl depreciation) Additional development costs
(IT personnel) Variable Production Costs Depreciation Total Production Costs Selling, General & Administrative Total Operating Expenses 0 1.201
1.201 2011 0 2012 6.000 NA 2013 14.360 139,3% 2014 20.222 40,8% 2015

Case Study Of International Flavor And Fragrance
International Flavor & Fragrance: A Stock For Defensive Investors International Flavor & Fragrance (IFF) is immune from market down–turns and
volatility in commodity prices and economic environment. The company's attractive business model of manufacturing and supplying of flavors and
fragrances for the food, beverage, personal care and household products industries either in the form of compounds or individual ingredients is allowing
it to prosper in any market environment. In addition, the natures of its end markets are also immune to market volatility and are growing gradually with
the growth in population and consumers demand. The company is operating in two business segments: Flavors and Fragrance. Its flavors compounds
are eventually... Show more content on Helpwriting.net ...
In the past three years, its revenue growth remained at an average of 3.5%, while earnings growth remained high around 15%. In the latest quarter, it
generated sales growth of 5% on constant currency basis. It's both business segments generated significant growth on the back of its smart strategies.
IFF's flavor business segment posted a sales growth of almost 7% on constant currency basis – which is pumped by its recent acquisition of Ottens
Flavors. In addition, its strategy of 'Win where it competes' worked for the company in the most recent quarter. In Latin America, it generated
double–digit growth in Beverage, Savory and Dairy, while sales in EAME region fueled by mid single–digit growth in Beverage and double–digit
growth in Savory. In North America, the company is targeting to achieve a leadership position is Dairy and Beverages markets. On the other hand,
IFF's fragrance segment also posted a sales growth of 4% on constant currency basis. On the earnings side, the company posted operating profit growth
of almost 9% on the back of mid–single digit growth in sales and by enhancing productivity and lowering manufacturing costs. Thus, the company
successfully achieved its target making double digit growth in earnings per share. Few other factors like buyback program and tax

Decision Making Within The Organization
First and foremost, stakeholders are individuals that have an interest or even influence of decision making within the organization. Stakeholders along
with elected officials, organizations, and special interest groups are valued based on their contributions and connections. In comparison amongst all
organizations, healthcare stakeholders play a key integral part because of regulations. Health care is highly regulated and policy driven and the right
personnel in your corner can go a long way. Many healthcare stakeholders are involved in the development of policy and have key capital connections
to promote and deny potential health care business altering regulations. They provide the funds which give organizations power to promote and push
their policies through legislatures. The funds that they provide can also be utilized to defund conflicting policies. The main goal for stakeholders is
profitability, more profit is equivalent to more power. Aligned with profitability stakeholders invest in productivity that yields the most profitability.
Unfortunately, the influence that stakeholders have on policy making can be directly related to money, they continue to hold great power in the
process because all promoted policies need a beneficiary. Financial Standing The last 5 years Kindred has been blasted with many highs and lows due
to the revolving healthcare industry. The last 2 years Kindred has reported losses in some quarters due to various reasons. The

Mercury Case
1. Do you think Mercury is an appropriate target for AGI? Why or why not? Mercury is an appropriate target for AGI. AGI is looking to increase its
revenue and profit by utilizing synergies. The initial aim of AGI for acquiring Mercury Athletics is to increase leverage with contract manufacturers
and to boost the cooperation with the retailers and distributors. AGI was one of the most profitable and successful companies in the market segment,
but the firm's size re mained rather small in comparison with the main competitors. Therefore, with the acquisition of Mercury, AGI planned to build
competitive advantage. Besides, the target company had well developed operation infrastructure, impressive labor facilities in China and numerous...
g Income | 8,345 | 8,512 | 8,682 | 8,943 | 9,211 | | | | | | | Women's Athletic: | | | | | | Revenue | 138,390 | 153,613 | 167,438 | 179,159 | 188,117 | Less:
Operating Expenses | 124,302 | 137,976 | 150,393 | 160,921 | 168,967 | 1 of 45/9/2012 9:27 PM | | | | | | | | | | | | | | | | | | | Operating Income | 14,088 |
15,638 | 17,045 | 18,238 | 19,150 || | | | | | | | | | | | | | || | | | | | | | | | | | | | | | | | | | | | | | | | | Women's Casual: | | | | | || | | | | | | | | | | | | | | | | | | | | | | Revenue |
36,802 | 0 | 0 | 0 | 0 || | | | | | | | | | | | | | | | | | | | | Less: Operating Expenses | 37,265 | 0 | 0 | 0 | 0 || | | | | | | | | | | | | | Operating Income | –463 | 0 | 0 | 0 | 0 || | |
| | | | | | | | | | | | | | | | | | | || | | | | | | | | | | | | | | | | | | | | | | | | | | Consolidated Revenue | 479,329 | 489,028 | 532,137 | 570,319 | 597,717 || | | | | Less: Operating
Expenses | 423,836 | 427,333 | 465,110 | 498,535 | 522,522 || | | | Less: Corporate Overhead | 8,487 | 8,659 | 9,422 | 10,098 | 10,583 || | | | | |
Consolidated Operating Income | 47,006 | 53,036 | 57,605 | 61,686 | 64,612 || | | | | | | | | || | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Capital Expenditures |

Agency : An Australian Company
Agency relationships in a business organization exist between the principal, who are the owners or capital providers of the firm and the management,
who form the agents. To avert conflict between the agents, the management should seek to fulfill the duties and responsibilities vested upon them by
the principal. However, management actions may lead to agency costs, which may be excessive or unnecessary emanating from the agency conflict. The
agency costs may entail excessive remunerations to self, neglect of duty, empire building by the management, pursuit of sales growth at the expense of
shareholder wealth or profits, inadequate investment of corporate resources in potentially profitable ventures at the expense of the shareholders,
assigning excessive perks to self, manipulation of dividend policy rather than wealth creation, and employee welfare objectives.
The Wesfarmers Way, an Australian company which operates a chain of supermarkets, department stores, office supplies and home improvement, safety
and industrial products, fertilizers and energy, as well as chemicals business is very much involved in reducing the agency costs. In line with managing
the agency costs, Wesfarmers Way should ensure that the goals of the management match those of the shareholders to ensure that the business owners
can initiate particular monitoring steps or incentive measures. This would ensure that the benefits accruing from the actions of the management are
greater than the costs incurred

Case Study: Petrobras
Petrobras SA
Petrobras released its fourth quarter and full year 2015 results on 21st March. The company has made some progress on adjusted basis through 2015
although on a reported basis its net loss increased by 15 % in USD terms over 2014 to US $ 8,450 million. The major cause of the increase was
impairment of assets and investments, generated by decreased crude oil prices and by higher discount rate, attributable to an increase in Brazil's risk
premium, resulting from a credit risk downgrade (losing its investment grade status) (US $ 12,849 million). Another big contributor to the increase in
reported net loss was the interest expenses and foreign exchange loss amounting to US $ 9,853 million.
Otherwise, the operating loss decreased from US $ 6,963 million in ... Show more content on Helpwriting.net ...
Hence, it could more than nullify any progress that the company claims to have made in terms of reduced losses, increased cash flows and margins
and improved efficiencies. Petrobras now faces a Herculean task of turning around the company which has deep ethical issues that take years to get
resolved and show any positive effect.
For the short term, some investors might be hopeful of a bailout by the Brazilian government. But you don't go out to bet on a bailout kind of thing in
the stock market. Further, a bailout is a far–fetched possibility at present. And even if a bailout does happen, the common shareholders come after the
more preferred claimants especially the banks and bondholders. And the net debt stands at over US $ 100 billion and the total debt represents 54 %
of total assets. So unless we get more clarity on this case, we can't have an optimistic view on the company. Therefore, it is advisable for equity
investors to stay away from this stock till at least the investigation is

Eli Lilly And Company Performance
Executive Summary Eli Lilly and Company (Lilly) is a global pharmaceutical company, ranked 115 on the Fortune 500. Lilly's operating performance
has been strong in 2011, with ROA and ROE much higher than its competitor, Pfizer. The company has improved sales in the year 2011; however, its
net income fell. Lilly's future performance is challenged by factors such as major patent expirations, which will expose the company to the generic
version of their drugs being produced by other manufacturers. Lilly has also experienced some pipeline setbacks, which includes the discontinuation of
major experimental drug projects. Lilly has been lately focusing on expanding through the acquisition of other businesses and has been using operating
cash... Show more content on Helpwriting.net ...
I can expect to see major R&D expenses; pharmaceutical companies invest heavily in bringing new drugs into the market to compensate for the ones
that go off patent. Thus, a large number of patents, trademarks, and other intellectual property rights can also be found. However, pharmaceutical
firms tend to have high profit margins. Apart from hedging against fluctuations in foreign exchange rates, the relatively limited use of derivative
instruments and hedges would reduce the inherent risk. Eli Lilly and Co was ranked number 115 on the Fortune 500 list in 2011, making it the 115th
largest company in the US in terms of revenue. However, the firm's ranking dropped in 2011 from being 112 in 2010. Regulatory Factors The
pharmaceutical industry is heavily regulated. According to Lilly's 10–K, their operations are extensively regulated by numerous national, state, and
local agencies. FDA mainly regulates all the testing, safety, quality control and post–marketing surveillance of pharmaceutical products. Accounting for
liabilities will then be a significant part of any lawsuits, thus, as an auditor, I would have to further look into the contingent liabilities in their balance
sheet. They have been subject to increasing government price control measures. Lilly also has international operations hence, is subject to extensive
price and market regulations in those regions as well. Economic

Abc Sporting Goods Case Summary
ABC Sporting Goods
Part 1– Complete the following ratio analysis for ABC sporting Goods Profit & Loss
Profit for 2006 was–86,318,
Profit for 2007 was–113,799
Between 2008–2009 ABC Loss 51,220
Between 2009–2010 ABC Loss 7,297
Return on sales was 7.52%
Return on Assets was 27.34%
Return on Net Worth was 83.69%
Quick Ratio was 0.48
Current Ratio was 1.59
Inventory turnover (gross sales divided by inventory) was 5.93
Assets to sales Ratio was 0.28
Total liabilities to net worth was 2.06
Part II Estimate the business value using BizStats. –Valuation Rule for Sporting Goods Store at BizStats.
These are the BizStats I found Profitable Sole ... Show more content on Helpwriting.net ...
Use the following formula:
Purchase price $100,000, down payment 20% or $20,000 which results in $80,000 being financed.
For $1,000 financed at 5%, the factor to calculate your monthly payment is .659955739. Therefore, for $80,000 your payment is $528 per month or
$6,336 per year. (Rounded)
We now can calculate the free cash flow available to pay the loan amount. We can use the following formula:

Net Profit
+interest paid (use previous years amount from P&L)
+Depreciation and amortization
= Cash flow
For example, if we have $10,000 for our cash flow and our payments are $528 x 12 months = $6,336; then to calculate our DSC or debt service
coverage ratio, we divide the Cash flow by the annual debt service or $10,000 / $6,336 =1.58x. If we borrowed $400,000 our monthly payment is
$2,640 or $31,680 and if our cash flow is

Airthread Connections
Valuation of AirThread Connections
1. Methodological Approach to the Valuation
a) WACC (Weighted Average Cost of Capital)– When we are supposed to value AirThread Connections with the WACC valuation method we will
have to use the following steps: * Determine the unlevered free cash flows of the investment. * Compute the weighted average cost of capital with the
following formula:
* Compute the value with leverage, VL, by discounting the free cash flows of the investment using the WACC.
APV (Adjusted Present Value)– This method involves determining the value of a levered investment using the following steps: * Determine the
investment's value without leverage, VU, by discounting its free cash flows at the ... Show more content on Helpwriting.net ...
To do this we had to calculate the reinvestment rate w/o synergies and the return on capital (RoC). 1. Reinvestment Rate (2012): * (CAPEX + Working
Capital – Depreciations & Amortizations)/NOPAT * 2. Return on Capital: * Income before minority interest/(Equity + Long term debt– Minority
interest) * 3. Long–term growth rate: * * Using this growth rate we calculated a terminal value of $6782.88 and a PV(terminal value) of $4698.39: * *
b) The present value of AirThread's going concern value is $7956.85. We calculated this number using the following setup: PV of Terminal Value +PV
of Unlevered Free Cash Flow +PV of Interest Tax Shield + Value of Non
–Operating Assets =Going Concern Value
4. Valuation of AirThread
a) We calculated the total value of AirThread (before considering any synergies) by subtracting the value of the non–operating assets from the going
concern value. This gave us a total value of $6237.85.
b) When assuming that Ms. Zhang's estimates for synergies are accurate we can compute a new unlevered free cash flow looking like this: Unlevered
Net Income| 337,1 | 447,0 | 582,2 | 760,6 | 902,8 | Plus: Depreciation & Amortization| 705,2 | 804,0 | 867,4 | 922,4 | 952,7 | Less: Capital
Expenditure| 631,3 | 719,7 | 867,4 | 970,1 | 1 055,0 | Less: Increase in

New World Chemicals, Inc.: Case Study
CASE CONTEXT
New World Chemicals, Inc. (NWC) hired Sue Wilson as its new financial manager and consequently, Ms. Wilson has to produce a sound financial
forecast for the company.
PROBLEM DEFINITION
In producing the financial forecast for NWC, Ms. Wilson has to determine the following:
Additional funds needed (AFN)
Free cash flow
In relation to the above, Ms. Wilson has to consider effects on the following items:
Operational capacity against sales projections
Assumptions in receivables management
Forecasted growth in fixed assets
Expected improvement in inventory handling
ANALYSIS FRAMEWORK
Methodology used in analysing the case is as follows:
Determine the initial forecast based on the following ... Show more content on Helpwriting.net ...
Paying dividends will reduce the available funds of the company but is a way to increase shareholder value. Increasing or decreasing of DPR spells
out the standing of the company to its shareholders. Reduction or not giving dividends for a period will reduce AFN but will mean that the company is
struggling to provide enough profit. Shareholders may see this as a signal that further investments for the company are riskier.

Profit Margin
Profit margin and AFN have inverse relationship. As profit margin increases, AFN will decrease. This is true, however, only when volume of sales
remains constant. More often the not when profit margin increases due to increase in prices, volume of sales will suffer, which may or may not
increase the net profit itself. If increase in profit margin is caused by operational efficiency or simply reduction of costs, it is safe to say that volume
of sales will not be affected. With this, AFN will decrease accordingly.
Capital Intensity Ratio (CIR)
CIR is a measure of how much money is invested to produce a dollar of sales revenue. Having a low CIR is favorable for a company. Assuming level
of sales is increasing and assets are increasing at a slower rate, CIR will decrease and vice versa. This means that assets required to produce same
amount of income is decreasing. If this is the condition, decreasing of CIR will reduce AFN. However, when

Essay on Managerial Finance Final Exam
Which of the following is NOT normally regarded as being a barrier to hostile takeovers? (Points : 5)| Abnormally high executive compensation
Targeted share repurchases Shareholder rights provisions Restricted voting rights Poison pills | 2. (TCO F) Which of the following statements is
correct? (Points : 5)| The MIRR and NPV decision criteria can never conflict. The IRR method can never be subject to the multiple IRR problem,
while the MIRR method can be. One reason some people prefer the MIRR to the regular IRR is that the MIRR is based on a generally more
reasonable reinvestment rate assumption. The higher the WACC, the shorter the discounted payback period.... Show more content on Helpwriting.net ...
34.0 b. 37.4 c. 41.2 d. 45.3 e. 49.8 (Points : 30) A; 34.0 DAYS CASH CONVERSION CYCLE = (DAYS INVENTORY OUTSTANDING) + (DAYS
SALES OUTSTANDING) – (DAYS PAYABLE OUTSTANDING) CCC impact by inventory reduction (DAYS INVENTORY OUTSTANDING) =
(Average inventory / Cost of goods sold) * 365 Original (DAYS INVENTORY OUTSTANDING) = ($20,000/$80,000) *365 =91.25 days Revised
(DAYS INVENTORY OUTSTANDING)= ($16,000/$80,000 *365) = 73 days–––––––––––––––––––– CCC by reduced accounts receivable (DAYS
PAYABLE OUTSTANDING) = (Accounts payable / Cost of goods sold) * 365 Original (DAYS PAYABLE OUTSTANDING) = ($10,000
/$80,000)*365 = 45.625 days Revised (DAYS PAYABLE OUTSTANDING) = ($12,000/$80,000) *365 = 54.75 days–––––––––––––––––––– CCC
impact by increased a/c payable (DAYS SALES OUTSTANDING) = (Total receivables / Total credit sales) * 365 Original (DAYS SALES
OUTSTANDING) = ($16,000/$110,000 *365) = 53.09 days Revised (DAYS SALES OUTSTANDING) = ($14,000/$110,000 *365) = 46.45 days
–––––––––––––––––––– CCC = (DAYS INVENTORY OUTSTANDING) + (DAYS SALES OUTSTANDING)
– (DAYS PAYABLE
OUTSTANDING) Original CCC = 91.25 + 53.09 – 45.63 = 98.71 days Revised CCC = 73 + 46.45 – 54.75 = 64.7 days Total impact = original CCC–
Revised CCC = 98.71 – 64.7 = 34.01 days CCC will be lowered by 34.0 days 2. (TCO C) Your company has been offered credit terms of 4/30, net 90
days. What will be the nominal annual percentage cost of its nonfree trade credit if it pays 120

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