...Northampton Group Inc. (NGI) is facing as it tries to increase shareholder value. In the case study it is stated by the firm’s major shareholders, that they believe NGI is currently undervalued. In connection with this, the management of NGI is considering several means of increasing the shareholders value. Due to difficult economic conditions resulting from the Global Economic Crisis, there are both many opportunities as well as many risks to the alternatives that NGI’s management is considering. This paper will provide both the opportunity to use different valuation methods that will determine the value of the assets of NGI, as well as a discussion of different possible alternatives to increase shareholder value. Furthermore alternative solutions for NGI’s problem will be provided. NGI needs to elaborate by starting an active acquisition strategy or re-organizing its corporate structure with either an updated capital structure or converting to a real estate income trust. The last part of this paper will conclude with several remarks and recommendations for the Chief Financial Officer of Northampton Group Inc., Mr. Patel. These final analyses will undertake in maximizing NGI’s shareholder value. Corporate Mission Northampton’s goal is to be recognized as the best mid-market hotel owner and operator in Canada by delivering professional and personalized service, maintain an engaged staff employing effective operating systems, build, acquire, and continually improve an...
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...is in, whether new marketplaces would be joined or whether to take out from current marketplaces. These kinds of choices can commonly have substantial financial effects. If, for example, a decision is taken to enter a new manufacturing company, and current organization in that industry could be bought, or a new organization be started from the beginning (Van Horne, & Wachowicz, 2008). 5 How financial objective can be different in case of non for profit organization. 5 The financial objectives of the not-for-profit organization must agree with the objective of the organization and financial constraints. For example, if the not-for-profit organization is particularly pleased to be an organization, an organization increase national could cause you to lose its appeal. Compose a record of objectives that fit the objective of the not-for-profit organization and are possible objectives (Saunders, et. al. 2006). 6 Define the types of stakeholder a company have and what impact do they possess on the corporate objectives. 6 Internal stakeholders: are the categories that are part of the inner structure of the company: 7 Assess the economic environment of the railway industry mentioned in the first scenario by performing the PEST analysis. 7 State the function of treasury 10 Task 2 11 2.1 Define working capital and state its importance to the...
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...Advanced Corporate Finance [FN2] Examination Blueprint 2013/2014 Purpose The Advanced Corporate Finance [FN2] examination has been constructed using an examination blueprint. The blueprint, also referred to as the test specifications, outlines the content areas covered on the examination and the weighting allotted to each content area. This document also lists the topics, the level of competence for each topic, and the related learning objectives and competencies. The learning objectives have been designed to ensure that the competencies are met. In addition, information is provided on the proportion of each question type presented in the examination (that is, multiple choice, quantitative problems, and so on). Use Candidates should use the examination blueprint to prepare for the course examination. The blueprint may not include all the topics listed in the course materials; however, candidates are still responsible for acquiring a broad-based knowledge of all topics not listed in the blueprint since these topics will be tested in assignment and review questions. The topics not listed in the blueprint will also provide candidates with a greater depth of understanding of finance concepts. Examination Objectives The objective of the 4-hour comprehensive examination is to test CGA candidates on the prerequisite knowledge required for advancement into PA1 and PA2, so as to ensure that the candidates have the broad-based knowledge in finance needed to function properly in the association’s...
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...EXECUTIVE SUMMARY The following report contains a critical analysis of the capital structure strategy employed by Leighton Holdings Ltd during the Global Financial Crisis (GFC) and also an assessment of optimal capital structure Leighton should use to fund future investments. Examination of the changes of the capital structure of the company over pre-GFC and post-GFC period (2004-2010) reveals a range of considerations were deliberated in the financing decision; these include not only the capital market conditions but also the size and urgency of funding required as well as costs and availability of alternate sources of funds. Applying various theoretical hypotheses in conjunction with a comparative study using Peer Firms, the report finds the current debt/equity mix lies in the high range of estimated optimal values. The current structure does compensate for the current volatility by reducing exposure to debt markets but also attempts to efficiently exploit a recent recovery in debt markets. Nonetheless, on the backing of peer analysis, Leighton should reduce its reliance on debt to better position itself against uncertainty and also exploit its advantages in debt markets to refinance debts for longer terms, hence locking in current rates. INTRODUCTION Leighton Holdings Ltd (LEI), the largest construction and contract mining service providers in Australia, has significant exposure both internationally and in a number of diverse markets. It’s core business however, which...
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...Aswath Damodaran INVESTMENT VALUATION: SECOND EDITION Chapter 1: Introduction to Valuation Chapter 2: Approaches to Valuation Chapter 3: Understanding Financial Statements Chapter 4: The Basics of Risk Chapter 5: Option Pricing Theory and Models Chapter 6: Market Efficiency: Theory and Models Chapter 7: Riskless Rates and Risk Premiums Chapter 8: Estimating Risk Parameters and Costs of Financing Chapter 9: Measuring Earnings Chapter 10: From Earnings to Cash Flows Chapter 11: Estimating Growth Chapter 12: Closure in Valuation: Estimating Terminal Value Chapter 13: Dividend Discount Models Chapter 14: Free Cashflow to Equity Models Chapter 15: Firm Valuation: Cost of Capital and APV Approaches Chapter 16: Estimating Equity Value Per Share Chapter 17: Fundamental Principles of Relative Valuation Chapter 18: Earnings Multiples Chapter 19: Book Value Multiples Chapter 20: Revenue and Sector-Specific Multiples 3 16 37 81 121 152 211 246 311 341 373 425 450 487 533 593 637 659 718 760 Chapter 21: Valuing Financial Service Firms Chapter 22: Valuing Firms with Negative Earnings Chapter 23: Valuing Young and Start-up Firms Chapter 24: Valuing Private Firms Chapter 25: Acquisitions and Takeovers Chapter 26: Valuing Real Estate Chapter 27: Valuing Other Assets Chapter 28: The Option to Delay and Valuation Implications Chapter 29: The Option to Expand and Abandon: Valuation Implications Chapter 30: Valuing Equity in Distressed Firms Chapter 31: Value Enhancement: A Discounted Cashflow...
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...(GIPS®) Global Investment Performance Standards (GIPS®), pp. i–iii and 1–9, (CFA Institute, 4.* 2005) A. Preface: Background of the GIPS Standards B. I. Introduction C. II.0. Provisions of the Global Investment Performance Standards – Fundamentals of Compliance * 5. The Corporate Governance of Listed Companies: A Manual for Investors (CFA Institute, 2005) Learning Outcomes 1. “Code of Ethics and Standards of Professional Conduct” The Code of Ethics establishes the framework for ethical decision making in the investment profession. The candidate should be able to state the six components of the Code of Ethics. The Standards of Professional Conduct are organized into seven standards: I. Professionalism II. Integrity of Capital Markets III. Duties to Clients and Prospective Clients IV. Duties to Employers V. Investment Analysis, Recommendations, and Action VI. Conflicts of Interest VII. Responsibilities as a CFA Institute Member or CFA Candidate Each standard contains multiple provisions for which the candidate is responsible. The candidate should be able to identify the ethical responsibilities required by the Code and Standards. * Readings...
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...Table of Contents Company Background 2 Financial Ratios 5 Bond Valuation 5 Wal-Mart vs. Target Competitor Analysis 7 Stock Valuation 7 Capital Budgeting 10 Cost of Capital and Capital Structure 12 Conclusion 13 References 13 Appendix 13 Company Background Wal-Mart Stores, Inc. (NYSE: WMT) Sam Walton founded Wal-Mart Stores, Inc. in 1962. Wal-Mart is a family-owned business that operates through many generations of Sam Walton’s heirs, who own over 50% of Wal-Mart through their holding company, Walton Enterprises. Today, Wal-Mart is led by Chairman, Greg Penner, the grandson-in-law of Sam Walton and President and Chief Executive Officer, Doug McMillon and headquartered in Bentonville, Arkansas. Wal-Mart’s brand and low price strategy, ‘Every Day, Low Prices’ prides itself on making a difference in customers lives, helping communities save money and live better domestic and international. Wal-Mart operates 11,532 stores in all 50 states, across 28 countries and 11 e-commerce websites. Each week nearly 260 million customers visit stores or websites (via online and mobile). Many of its brick-and-mortar stores, operate 24 hours a day, seven days a week and consumer products range from a variety of groceries, electronics, sporting goods, clothing, home improvement products, pet supplies, pharmacy and most everything in between. In 2015, Wal-Mart generated the highest sales in its grocery division at 60% of $288 billion dollars in revenue. Over the past...
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...FACULTY Section I: Section II: Section III: SectionIV: Section V: FINANCIAL MANAGEMENT AND POLICIES Quarter III, Spring 2010 Elena Loutskina Marc Lipson Robert Conroy MarcLipson Elena Loutskina IMPORTANT SCHEDULE ANNOUNCEMENT: Thursday, February 19 is a DAY LONG exercise that requires your participation until 5:30pm that evening. By compressing the exercise into a single day we were able to designate Friday as a Reading Day. Please DO NOT schedule any travel until after your obligation for the exercise ends at 5:30pm Thursday evening. COURSE DESCRIPTION First-Year Financial Management and Policies (FMP) reflects three important features of the Darden MBA Program: (1) it is a general management program; (2) the program, through its frequent use of the case method of instruction, has a practical, pragmatic bias and a decision- orientation; and (3) the first-year program provides the basic training on which students can build in the second-year. Consistent with the first-year program, FMP aims to provide: 1. An Introduction. The course provides the basic framework necessary to pursue further study in finance in the second-year of the MBA program and on his or her own thereafter. This framework is an orientation towards valuation. 2. Basic Mastery. The course emphasizes essentials, the tools and concepts that every general manager, entrepreneur, or manager in other functional fields should know. 3. A Corporate Perspective. Because we seek to understand the problems of general managers...
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...chemicals producer, in an attempt to implement its new strategy of pursuing high growth businesses. The financial crisis that hit in the fall and the termination of PIC joint venture called into question Dow’s ability to finance the deal. Based on the valuation models, paying $78/share for Rohm and Haas remained a good value for Dow post financial crisis as the combined company retained its ability to generate synergies. Dow should proceed with the deal as announced to prevent costly litigations and aim for maximizing long-term shareholder value. To avoid being downgraded to junk status and incurring other concerns of financial distress, Dow should attempt to renegotiate the terms of its financing, particularly its $13 million bridge loan. Table of Contents I. The Firms…………………………………………………...…….p. 3 a. Dow Chemical b. Rohm & Haas c. Petroleum Industries Company II. The Acquisition……………………………………………..……p. 3-5 d. The Rationale e. The Valuation f. The Financing III. The Risks……………………………………………………….…p. 5 IV. The Financial Crisis……………………………………….……...p. 5-7 g. The Macroeconomy and Industry h. The Firms i. The Post-Crisis WACC j. The Post-Crisis Valuation k. The Post-Crisis Financing V. The Recommendations……………………………………………p. 7-8 l. The Options m. The Recommendations VI. The Results………………………………………………………..p. 8-9 VII. Exhibits………………………………………………………..…..p. 10-12 I. The...
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...Spring 2011 James Berman 212.388.9873 jberman@jbglobal.com Description: In this introduction to corporate finance, emphasis is on utilizing long-term debt, preferred stock, common stock, and convertibles in the financial structure of a corporation. Learn to analyze methods of financing using internal and external funds. Topics include: financial management; corporate growth; business failures; return on investment; risk leverage; the time value of money; dividend policy; debt policy; and leasing. Instructor Biography: James Berman, the president and founder of JBGlobal.com LLC, a Registered Investment Advisory Firm, specializes in asset management for high-net-worth individuals and trusts. With over thirteen years of experience managing client portfolios, Mr. Berman is a professional analyst of financial vehicles, including equity and bond mutual funds, and is an expert in global investment, asset allocation and modern portfolio theory. As the president of JBGlobal LLC, the general partner of the JBGlobal Fund LP, Mr. Berman manages a global equities fund that invests in the United States, Europe and Asia. Mr. Berman is a faculty member in the Finance Department of the NYU School of Continuing and Professional Studies where he teaches corporate finance. He serves as sub-advisor to Eitan Ventures LLC, a venture capital fund based in New York. Mr. Berman has appeared on CNBC and the Fox Business Channel and is regularly published and quoted in a variety of publications...
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...Historical-cost accounting Is a system of accounting based on the principle that assets should be valued at historical cost or historical cost is the original monetary value of an economic item. Historical cost is based on the stable measuring unit assumption. In some circumstances, assets and liabilities may be shown at their historical cost, as if there had been no change in value since the date of acquisition. The balance sheet value of the item may therefore differ from the "true" value. It is relaxed to some extent by such practices as the valuation of stock at the lower of cost and net realizable value and, revaluation of fixed assets. The advantages of historical-cost accounting are that it is relatively objective, easy to apply, difficult to falsely manipulate, and suitable for audit verification. In times of high inflation, however, the results of historical-cost accounting can be misleading as profit can be overstated, assets understated in terms of current values, and capital maintenance is only concerned with the nominal amount of the capital invested rather than its purchasing power. Because of these defects it is argued that historical-cost accounting is of little use for decision making, but attempts to replace it with such other methods as current-cost accounting have failed. Company legislation sets out the rules for the application of historical-cost accounting to financial statements. Companies may also choose to use alternative accounting...
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...A Tutorial on Discounted Cash Flow, Fall 2015 Notes prepared by John Tsagarelis, jtsagare@uwo.ca DRAFT: Comments, Suggestions Welcome 9/20/2015 Preamble As we walk through life we develop mental maps of situational settings. These are not sight patterns, but rather decision patterns among choices available to us in any given circumstance. For example, we take familiar roads to our summer cottage or accept return-on-equity is an unbiased stock return predictor. Once we form a map, it is hard for us to realize it may be incorrect and/or to imagine alternative scenarios. This lack of flexibility in decision making is as dangerous as following maps on our satellite-based navigation devices that fails to account for new roads. We could call this a blind spot, but it is more sinister—it is a false picture of reality. It is for this reason, during creative problem solving and brainstorming sessions groups often strive to suspend judgement until they have entertained ranges of plausible scenarios and responses to them. The initial scenario we envision may be woefully inadequate and our initial responses significantly inferior to others we can imagine. As part of our inherent capacity to memorize, we should always strive to challenge our beliefs through a feedback mechanism. To test our existing constructs with new potentially better ones. It is with this in mind that we explore the classic or naive discounted cash flow modelling techniques. 1 Introduction The...
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...corporation should raise and manage its capital, what investments the firm should make, what portion of profits should be returned to shareholders in the form of dividends, and whether it makes sense to merge with or acquire another firm. Balance Sheet Approach to Valuation If the role of management is to increase the shareholder value, then managers can make better decisions if they can predict the impact of those decisions on the firm's value. By observing the difference in the firm's equity value at different points in time, one can better evaluate the effectiveness of financial decisions. A rudimentary way of valuing the equity of a company is simply to take its balance sheet and subtract liabilities from assets to arrive at the equity value. However, this book value has little resemblance to the real value of the company. First, the assets are recorded at historical costs, which may be much greater than or much less their present market values. Second, assets such as patents, trademarks, loyal customers, and talented managers do not appear on the balance sheet but may have a significant impact on the firm's ability to generate future profits. So while the balance sheet method is simple, it is not accurate; there are better ways of accomplishing the task of valuation. Cash vs. Profits Another way to value the firm is to consider the future flow of cash. Since cash today is worth more than the same amount of cash tomorrow, a valuation model based on cash flow can discount the...
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...represent the purchase and sale of land, buildings, equipment, and other assets not generally held for resale. In addition, investing activities include the purchase and sale of financial instruments not intended for trading purposes (discussed in chapter 18). Financing activities include transactions and events whereby cash is obtained from or repaid to creditors (debt financing) or owners (equity financing). Financing activities would include, for example, acquiring debt, capital leases, issuing bonds, or issuing preferred or common stock. Financing activities would also include payments to retire debt, reacquiring stock (treasury stock), and the payment of dividends. 17-2. When auditing the investing and financing cycles auditors typically address the following issues: • What assets are necessary to support the operations of the entity, and what are management’s long-range plans for growing the entity’s asset base? Answering this question assists the auditor in developing expectations of long-term assets needed to support operations. • What assets were acquired, or disposed of, during the period? Answering this question confirms the auditor’s expectations regarding assets needed to operate effectively. It also assists the auditor in developing expectations of regarding financing activities. • How were newly acquired assets financed? Answering this question completes the audit of the investing and financing cycles. These cycles are often audited...
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...MERGERS AND ACQUISITIONS LITERATURE REVIEW LUKE WALTON Table of Contents Abstract 3 Introduction 3 Background and motivation 3 Objective or aim of this literature review 4 Findings from current available literature 4 Issues from current research 5 Contribution to current literature and stakeholders 5 Section One 6 Motivation of M&A’s 6 Synergy 6 Agency theory 7 Hubris 7 Relationship between motives and financing 8 Section Two 9 Payment methods 9 Financing hierarchy vs. market conditions 9 Differing views on leverage 10 Valuation and the agency problem 10 Managerial ownership 11 Section Three 12 Performance of mergers and acquisitions 12 Performance indicators 12 Methodology 13 Profitability 13 Performance due to the motivation 14 Conclusion 15 Summary and findings 15 Areas of future research 17 Qualitative research in M&A’s 17 Decision making process for methods of payment 17 Unified methodology in determining M&A performance 17 References 19 Abstract Mergers and acquisitions have become a common practice for firms as a mean to expand and increase profitability. Existing evidence is still unable to strongly determine what factors make a successful M&A due to inconsistency in data and findings. This paper aims to provide an insight to the steps included in the M&A process by comparing existing literature and hopes to suggest key determinants of a successful M&A transaction. Evidence shows...
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