...IV. Capital Budgeting A. Suppose the company is considering a potential investment project to add to its portfolio. Calculate the following items: Before Home Depot calculates the net present value (NPV), internal rate of return (IRR), terminal value (TV), and modified internal rate of return (MIRR), the company must calculate its FCFs. The calculation begins by subtracting the operating costs and the 20% depreciation expenses from the cash flows derived from sales revenues. Next, the income tax (35%) is subtracted from the resulting operating income to arrive at the company’s after-tax earnings before income tax (EBIT). The final step is for Home Depot to add back the depreciation to the EBIT to arrive at the company’s FCFs. For example,...
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...in installment of simply rent? Use time value of money. Should I Buy a Home or Just Keep Renting? Kristin Wong Should I Buy a Home or Just Keep Renting? Dear Two Cents, I’m out of debt, and I’m now saving for a down payment on a home. It’s always been my dream to be a homeowner. But lately, I read a lot of arguments against it in favor of renting. How do I know if it’s a good idea for me? Should I buy or keep renting? Sincerely, Hopeful Homeowner Dear HH, For a long time, conventional wisdom seemed to be that you grow up and buy a home because that’s just what you do. But lately, people are realizing that it isn’t always the smartest financial move. Obviously, the housing crisis has a lot to do with that—it’s made people question the standard assumption that homeownership equals financial stability. Five Things I Wish I Had Known Before I Bought a House Homeownership isn’t a good or bad idea on its own. It has everything to do with your own situation. Sometimes, buying a home is the smart thing to do; other times, it really isn’t. Whether or not it’s smart for you will depend on a few different factors. Here’s what you should keep in mind. Don’t Think of a Home as Your Main Investment Should I Buy a Home or Just Keep Renting? The biggest argument for owning a home is that it’s an “investment.” But a lot of people overestimate the return on this investment. People tend to believe that homes are appreciating assets, but this isn’t always true. Yale economist and...
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...Costs of FDI on home country…………………………………………………...6 Definition of group’s name and FDI 1.Name of the group: F.A Corporation a.Meanings: This name has a variety of meanings, which are: - We are all Forever Alone, that's the reason why you always should look for us when you need somebody to love because we are Forever and Fully Available - We are also Fascinatingly Adorable, Fantastically Amazing b.Connection to the subject: - The name F.A refers to Financial/Foreign Aid, a very important part of International Economics, involved in International Trade as well as International Movements of Factors (which are, in this case, International Investment and International Technology Transfer), when capital and other resources flow to the less developed countries for help. 2. Definition of FDI: There are two concepts of FDI and two matching ways of measuring it. One is that FDI is a particular form of the flow of capital across international boundaries from home countries to host countries. These flows give rise to a particular form of international assets for the home countries, specifically, the value of holdings in entities, typically corporations, controlled by a home country resident or in which a home country resident holds a certain share of the voting rights. The other concept of direct investment is that it is a set of economic activities or operations carried out in a host country by firms controlled or partly controlled by firms in some other (home) country. These...
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...A home of your own house is the typical American Dream. Who in this county wasn’t raised in the environment that taught us, owning your own home is a desired goal and solid investment for the future. From late 2001 through early 2004, the housing market was busting record rates in sales and the fast growth made housing prices soar to record highs. For example, the value of a home bought in late 2001, for a price of $290K, could well have the retail value of $340K by the middle of 2002, and by the following year could near double in value to an astonishing $460K or more. These out of the norm home values were driving people to suddenly sell their homes they had owned for years at double the original value, and make a nice profit to reinvest that money into a “dream home”. This also caused a swell of first time buyers to feel the need to quickly get in on the boom before it was impossible to own a home due to the price. The Fed Reserve set the stage for this boom and made this time frame an “anything goes” for the banking and investment community. In the late 1990’s through the early 2000’s, the U.S. economy was facing a mini recession and the tech industry’s dot com bubble popped; leaving Wall Street and it’s investors in a short fall. The Federal Reserve lowered interest rates to an all-time low, that hadn’t been seen in over forty years. Investment companies and banks were looking to get a higher return on their money and capital investments. Over the course of time, the Fed...
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...Paul XXXXXX XXXXXXXXX University International Financial Markets: Foreign Direct Investment FIN630 – Global Financial Management March 17, 2011 Foreign Direct Investment: Vernon’s product life-cycle theory Raymond Vernon’s theory was different than the modern day theories of the 1960’s. Before Vernon, economists thought the reason a country traded with another was because of some advantage it had over the other for producing a product. The advantage was thought to be mostly related to cost; a country could produce it cheaper. Vernon did not agree with this way of thinking. Raymond Vernon believed that products have a life cycle. His theory put emphasis on invention and new products. He believed that most trade came from manufactured products especially products saved consumers time and effort from work. Vernon believed that more advanced or stronger economic countries would focus on developing new products and inventions because those economies would have the economic structure to support research and development (Katsioloudes & Hadjidakis, 2007). Vernon believed that countries varied in economic development and they traded with each other not because they were superior but because it was a good opportunity for both. For example, during the 1950’s and 60’s the United States was a much more developed economic leader than Japan; however, trade between the two countries would not come from the U.S. having an advantage over Japan. It came about because it...
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...There are different types of interests, including investment interest, qualified residence interest, student loan interest, and personal interest, which are either deductible or nondeductible. Personal interests are interests on car loans, credit cards, loans for appliances and furniture and interest on loans made by one person to another. Personal interest is nondeductible. If interest is paid on a qualified student loan, taxpayers may be able to deduct the interest as deduction for AGI. Generally, the allowable amount for student loan is lesser of $2,500 or the amount of interest taxpayer actually paid. Investment interest is interest paid on money borrowed to purchase or hold investment property. It is tax deductible on income tax return up to the amount of the net investment income. However, if the interest is incurred to produce tax exempt income, it cannot be deducted. Investment interest is not any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. The qualified residence interest is interest taxpayer pays on a loan secured by one’s main home or a second home. The loan may be a mortgage to buy primary home, a second mortgage, a home equity loan, or line of credit. The main home is where taxpayer lives most of the time. A second home is other residence taxpayer owns and treats as a second home. If the second home is rented, taxpayer must also use it as a home during the year for more than the greater of 14...
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...they must make a decision about whether to stay or leave given the increase. They have narrowed the decision to two options – stay in the current home and accept the increased rent or buy the home next door. Rent If they choose to rent, they are incurring a substantial rent increase over 5 years that is essentially a sunk cost. Mr. Linton is a resident so we can assume that his paycheck is modest and that Mrs. Linton would bare the majority of the rent increase. On the other hand, continuing to rent would eliminates the time, cost, upfront investment and risk of considering a home purchase. The landowner has also promised that this will be the only large rent increase. Exhibit one also indicates steady rent prices and modest increases. Since the Lintons plan to move in the medium term, a home purchase is just one more thing they would have to manage and settle at the end of the 5 years. If the Lintons are risk averse, have limited time, and need a large nest egg for other uses, continuing to rent would avoid those potential issues. Buy In considering a purchase, the Lintons are accepting increased risk, upfront cost, and time. Their risk is that their investment will not reap rewards at the end of the 5 years. The market is not expected to appreciate substantially in the next 5 years so the Lintons must consider if their investment is worth the risk of the recommended 120k. Their accountant, warned against much price appreciation. Exhibit one also indicates a similar warning...
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...Transfers Consolidation Procedures Consolidation Concepts Intercorporate Investments Business Combinations One route to corporate expansion is the external approach of acquiring other companies in business combinations, as discussed in Chapter 1. Another approach to expansion is through internal growth. While such growth can occur at a single location, companies often expand by establishing additional locations. For example, Wal-Mart’s phenomenal growth would have been impossible had the company not established many new stores at various locations throughout much of the country. When operations are conducted at more than a single location, the different locations may be referred to as sales agencies, branches, plants, or by numerous other terms. Unfortunately, terminology referring to multiple operating locations is not standardized. In addition, many different approaches are taken in establishing internal accounting and reporting systems for companies operating through outlying locations. Distinction between Sales Agency and Branch The difference between a sales agency and a branch most often has to do with the degree of autonomy. A sales agency, sometimes referred to simply as an “agency,” usually is not an autonomous operation but acts on behalf of the home office. The agency may display and demonstrate sample merchandise, take orders, and arrange for delivery. The orders typically are filled by the home office because a sales agency usually does not stock inventory. Merchandise...
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...establish relationships between eight different variables. I incorporated the following variables into a small survey: Age, Income, Investment, Number of Children, Number of Years of college, Additional Investment for the Current Year and Home Value. The reason for studying this data is because I am a finance major and going to be working towards becoming a financial advisor. I created a survey that answered the questions for the criteria listed above. I asked friends and family through email and facebook, and told them the reason for my asking. Everyone was willing to participate, as I kept their personal information confidential. I took the survey results and computed with 49 surveys. After analyzing the data I noticed that there were many relationships amongst the variables. Based on the research I concluded that the higher the age the more that they are willing to invest for the current year. There was also a strong relationship between age and income. The older the person, the more money they made. The dependent variable was age. Older people make more money, are more familiar with investments, and are more willing to make larger investments currently. Also, age related to home value in that an increase in age was related to an increase in home value. Analysis Investments | Income | Education | Kids | Home Value | Additional Investments | Age | 72000 | 198000 | 4 | 4 | 480000 | 25000 | 38 | 225000 | 300000 | 4 | 3 | 790000 | 50000 | 43 | 4000 | 30000 | 2 |...
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...blame? Flashback to year 2003: Rohit (name changed to protect identity), a good friend of mine and someone who was officially considered to be a genius with an IQ of 150+, graduated from one of the leading IIM’s. Rohit managed to make it into the New York Headquarters of the most sought after firm that had arrived on campus for the first time – Lehman Brothers – a top U.S. Investment Bank (then). On joining, he was assigned to Lehman’s mortgage securities desk that dealt with Collateralized Debt obligations (or CDO’s). Following is an extracted transcript of a chat session I had with Rohit back in 2004: Me: So man, you must feel like you are on top of the world. Rohit: Yes dude, the job here is amazing, I get to interact with people around the world, investment managers – who want to invest millions of dollars Me: great…so tell me something interesting. What’s your job all about? Rohit: You know there is a great demand for American home loans, which we buy from the U.S. banks. We then convert these into what is called as CDO’s (Collateralized Debt Obligations). In plain English – this refers to buying home loans that banks had already issued to customers, cutting them into smaller pieces, packaging the pieces based on return (interest rate), value, tenure (duration...
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...Solutions.com Richman Investments Rel 1, Ver.0 8/11/2012 Richman Investments Business Continuity Plan By Emergency notification contacts Name | Address | Home | Mobile phone | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Date | Summary of changes made | Changes made by (Name) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Revisions control page Purpose The purpose of this business continuity plan is to prepare Richman Investments in the event of extended service outage caused by factors beyond our control (natural disasters, man-made events), and to restore services to the company in a minimum time frame. All Richman Investments sites are expected to implement preventive measures whenever possible to minimize operational disruptions and to recover as rapidly as possible when an accident occurs. The plan identifies vulnerabilities and recommends necessary measures to prevent extended communication service outages. It is a plan that encompasses all Richman Investments system sites and operations facilities. Scope The scope of this plan is limited to disaster recovery. This is a business continuity plan, not a daily problem resolution procedures document. Plan objectives * Serves as a guide line for Richman Investments recovery teams. ...
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...Home Maintenance One of the biggest investments that a family will ever make is their home. Along with that investment comes another important aspect to owning a home, maintenance of it year around. Making the most of your investment is important and to insure this one must maintain the interior, exterior, plumbing, and the appliances. Maintenance benefits Maintaining your home comes with many benefits that can add value to your investment. Home maintenance is like a well checkup that is done on children but pertains to your house and its well-being. Keeping up with the maintenance saves you time and money in the long run as well as adds value to your investment. A home in despair increases safety/health risks, runs inefficiently which increases utility costs, and requires greater expenditure for maintenance and repair costs. Maintaining your home protects the value, improves the homes appearance, and keeps its appeal to the homeowner or other potential buyers. This also gives peace of mind to the home owner knowing that all systems, equipment, and components are in functional working order. The added value to the home with all the maintenance performed makes the home more desirable to potential buyers when it is placed on the market. Buyers’ take maintenance into consideration as well as other things like access to schools, neighborhood activity, traffic on through streets, and even the base price. In most cases a home inspector will be hired by the potential buyer...
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...Personal responsibilities, to me means having a set number of tasks that I must do each and every day and be accountable and liable for the outcome of these tasks and the effect they have on my life. For example one personal responsibility that I have is the ownership of my own home. Just over three years ago now I decided to purchase my own home. I was lucky enough to have a close family member that was looking to buy a larger home for his family, so I was given the opportunity to purchase a small three bedroom two bath home in the small town I grew up in. To be able to impark on such an investment was both scary and joyful at the same time. The investment has taught me about money management including monthly mortgage payments, upkeep/maintenance, and payment of expenses. “Money management may be based on a simple idea, but there is a big incentive for us to make it seem more complicated than it really is. If we don’t understand money, then we don’t have to be responsible for it.” Becoming A Master Student, p.295). This investment, has taught me a great deal about money and the ability to manage my money, holding me responsible for the house as well as the money involved to pay for the investment. “There are three main steps in money management: First, tell the truth about how much money you have and how much you spend (discovery). Second, commit to spend less than you have (intention). Finally, apply the suggestions for earning more money, spending less money, or both...
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...Foreign Direct Investment Learning objectives • Be familiar with current trends regarding FDI in the world economy. • Understand the different theories of foreign direct investment. • Appreciate how political ideology shapes a government’s attitudes towards FDI. • Understand the benefits and costs of FDI to home and host countries. • Be able to discuss the range of policy instruments that governments use to influence FDI. • Articulate the implications for management practice of theory and government policies associated with FDI. The focus of this chapter is foreign direct investment (FDI). The growth of foreign direct investment in the last 25 years has been phenomenal. FDI can take the form of a foreign firm buying a firm in a different country, or deciding to invest in a different country by building operations there. With FDI, a firm has a significant ownership in a foreign operation and the potential to affect managerial decisions of the operation. The goal of our coverage of FDI is to understand the pattern of FDI that occurs between countries, and why firms undertake FDI and become multinational in their operations as well as why firms undertake FDI rather than simply exporting products or licensing their know-how. The opening case describes the international growth of Starbucks. The closing case explores Cemex’s foreign investments. OUTLINE OF CHAPTER 7: FOREIGN DIRECT INVESTMENT Opening Case: Starbucks’...
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...these life stages, you will have different needs. As a parent, you would want your children to learn the value of money and how to manage it wisely. As a retiree, you would want to enjoy perks that reward you for your years of hard work. Whether you are single with a career, married with kids, working as an OFW or empty nesting, BDO has a variety of deposit accounts tailor fit to your needs. What’s more, our extended banking hours enables you to keep your money at hand, throughout the hours of your day. BDO continues to find ways for you, keeping your money safe, managing and growing your funds so that through rainy and sunny days, your money’s growth potential is maximized. Trust and Investments- peso-denominated UITF’s, dollar-denominated UITF’s and customized portfolio mngt.=> Unit Investment Trust Funds. Unit...
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