Estimated overall corporate weighted average cost of capital: We assume all the basic data are correct. Given is the future Debt/Equity ratio (Estimated Proportions of future Funds Sources). Also Pioneer’s cost of equity was given as 10% (Rs). The company’s after tax cost of debt was 7.9% (Rb*(1-Tc). Tax rate was 34%. From the formula: Rwacc = Equity/(Equity+Debt)*Rs +
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Four basic financial statements: * Balance Sheet * Income Statement * Statement of Retained Earnings * Statement of Cash Flows Players: * Investors – trading shares – get dividends * Creditors – trading bonds – get interest rate; risk is less than if you´re an investor * Managers Financial accounting – provides info for managers and people outside the firm. Managerial accounting – provides confidential info for internal decision-makers (“private” or internal accounting)
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from corporate abuses. decrease audit costs for U.S. firms. | 7. Which one of the following is a capital budgeting decision? (Points : 3) determining how much debt should be borrowed from a particular lender deciding whether or not to open a new store deciding when to repay a long-term debt determining how much inventory to keep on hand
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Debt Policy at UST Inc. Group #10 What are the attributes and primary business risks associated with UST, from viewpoint of a potential creditor (bondholder). Generally, UST is one of the most profitable companies in America. It is also the first and leading producer of smokeless tobacco. However, it still meet some risk. First of all, UST has seven current health related lawsuits. Secondly, UST didn’t has value opportunity to expand in international market. Finally, UST didn’t have an effective
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growth of the financial markets and the company’s growth [1]. The financial manager of any company should face three crucial decisions: the first one capital budgeting, what are the real assets the company should acquire?. The second one is the financing decision, how these real assets should be financed?. The last decision is concerned about when the company starts to generate more and more profit should the company keep this profit to reinvest it again and keep it in its retained earnings? Or it
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internally by increasing sales, lowering sales/operating expenses by 1%, which led to an increase in profit margin (net profit/sales) from 4.3% to 5.1%, increasing financing & other income by $42 million, while short term investments increased by 22%, accounts payable increased by 15% (“free” financing from vendors) and Long Term Debt stayed the same. Dell supported this growth externally by issuing an additional $74 million of common stock (the conversion from preferred to common stock is included
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Competitive price pressure • Royalty payments to Microsoft • Aggressive pricing of Nokia phones to capture market share For NSN, key drivers are near-term restructuring charges and a phase-out of less-profitable operations. 3) For the debt and equity financing alternatives, calculate the pro forma EPS, EBIT interest coverage, and book value leverage ratios for the downside scenario. See Exhibit 14. Based on the pro forma impact on the
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ac-vi-es CFI is the cash flow from inves-ng ac-vi-es CFF is cash flow from financing ac-vi-es Statement of Cash Flows 5 Statement of Cash Flows Balance Sheet CFO Net cash from opera-ng ac-vi-es Assets Liability & Equity From OA CE Opera-ng ΔCE
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growth well. * Financial structure risk. At the end of the first quarter of 2000, the company’s debt to capital ratio was 99%, which shows the company has much more debt than equity. The company uses more debt financing than equity financing. A company with high debt-to-capital ratios, compared to a general or industry average may show weak financial strength because the cost of these debts may weigh on the company and increase its default risk. * Strategic partnership risk. Amazon was
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whose yields are uncertain; and in which capital can be obtained by many different media, ranging from pure debt instruments, representing money-fixed claims, to pure equity issues, giving holders only the right to a pro-rata share in the uncertain venture.? This question has vexed at least three classes of economists: (1) the corporation finance specialist concerned with the techniques of financing firms so as to ensure their survival and growth; (2) the managerial economist concerned with capital budgeting;
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