Hai Xing Shipping Company Ipo Case Study

2) Although there is more shares, the Earnings after taxes are now higher due to the lower variable costs, which compensates for the increase in earnings based on the same 1,000,000 units at $30. Also the bigger part of the 14M invested, 10M was financied with issuing of

We use Capital Asset Pricing Model (CAPM) approach to calculate the cost of equity. The formula of CAPM is re = rf + β × (E[RMkt] – rf).

Week 1 – Introduction – Financial Accounting (Review) Week 2 – Financial Markets and Net Present Value Week 3 – Present Value Concepts Week 4 – Bond Valuation and Term Structure Theory Week 5 – Valuation of Stocks Week 6 – Risk and Return – Problem Set #1 Due Week 7* – Midterm (Tuesday*) Week 8 - Portfolio Theory Week 9 – Capital Asset Pricing Model Week 10 – Arbitrage Pricing Theory Week 11 – Operation and Efficiency of Capital Markets Week 12 – Course Review – Problem Set #2 Due

Our estimated cost of capital, 20.81%, is lower than Ricketts’ expected return, 30%-50%, thus the investment is worthy. However, it’s higher than other pessimistic members’ expected return, 10%-15%, making the decision more complex and requiring further valuation。

in our calculations, as this company exhibited dramatic value differences to others in the sample, (likely to skew our results and prove misleading). Using the average of the revised sample field for each ratio, we inserted Torrington’s values where appropriate to generate an entity value. The findings generated two values for Torrington, 606 million and 398 million. Taking the average of these two numbers, Torrington exhibited a relative value of 502.41 million. Because of the lack of related information given in the case, and the often large differences in measures amongst competitors, different capital structures, internal management strategies, there remained many unknowns in our model. We decided it would be best to use this valuation to reaffirm our assumptions in our DCF valuation. (Please see exhibits)

We added the market risk premium of 6% to the 4.60% because 6% is the rate that investors want above the risk free rate due to the risk of the investment. This equals 10.6% which is then multiplied by the beta of the company of 1.1. Beta is a measure of the stock’s volatility in relation to the market. A beta of 1.1 means that Worldwide Paper Company has slightly higher volatility than the market does. The total cost of equity then calculates to equal 11.2%. This tells us that given the risk taken in investing in the company, a shareholder should expect an 11.2% return.

In FCFE approach, the required rate of return by shareholders is required and can be calculated using the CAPM model, which the information showed that the risk free rate (derived from yield from treasury notes) and the estimated market risk premium are 5%, the beta implemented in the CAPM model cannot be directly obtained since JetBlue has never been listed before hence a medium has to be used which the Southwest beta of 1.6 is chosen given the characteristics and nature of the two companies are similar hence is expected to be affected by similar systematic risk. The calculated required rate of return therefore would be 5%+1.6(5%)=14%. In contrast, in the FCFF approach, a weighted cost of capital (WACC) is required to use, which can be determined as the percentage of debt to equity multiply by the cost of debt plus one minus the percentage of debt to equity multiply by the cost of capital, or the required rate of return. The percentage of debt to equity is derived from the balance sheet of JetBlue as 99%. The cost of debt can only be indirectly obtained from the current debt structure of Southwest Airlines, the 7.375 debenture (with yield to maturity of 8.68%) is chosen given it is a long term debt and to remain conservative. It is assumed that the long term debt of JetBlue worth of $300m is separately obtained from three different sources. Thus the WACC is calculated as

After it completes the share repurchase, the cash figure will decrease by SEK 4 billion and the market value of equity will decrease by SEK 4 billion.

As a shrewd financial analyst you observe that the net working capital of the firm has typically been about 20% of the annual revenues. How would you incorporate this observation into the analysis?

The Headquarter of Shin Han Investment Company is in South Korea, Seoul. It is first bank in South Korea, established the Bank in 1897. “Shin Han bank started as a small company with a capital stock of KRW 25.0 billion, 279 employees, and three branches on July 7.” (Shin Han, 2014). Shin Han Company plan to set up the branches in Singapore Orchard in order to enter into investment market. Singapore is developed on finance part and many pother companies are investing in Singapore recently. Shin Han Company is specializing on investment in South Korea. Moreover, Sin Han Investment Company will take time to set up branches in Singapore. The duration is 2014.01.11 ~ 2015.31.12.

SGX named Derivatives Exchange of the Year. (2017, September 27). Retrieved October 16, 2017, from http://repository.shareinvestor.com/rpt_view.pl/id/ea83bdffe117d3588f404fc443cbb4a78801de308c8e152c96b1924e1c195e00/type/si_news

As Mainland Chinese companies develop, innovate, and grow, China has become one of the superpowers in the world. Traditional state-owned businesses introduced private capital to break up state monopolies and became joint ventures to solve the potential management issues. In this way, Chinese companies were transformed from “sick men”, as westerners once described them, to “strong lions”, reflecting westerners’ updated impression of China. Simultaneously, emerging companies entered the domestic market quickly due to their pre-eminent technology and unparalleled innovation. However, currently, all Chinese companies face one huge problem—lack of capital.

BBC’s working capital policy was too conservative. This is apparent in their high level of net working capital with more than 4.2 million in 2010-2011 fiscal year. Although, the net working capital was in the positive figures, their assets were 10 time more than their liabilities. When further reviewing this figure it is because they have a large amount of inventory and accounts receivable. Their liquid assets to total assets ration was between 62% and 66%. Where industry bench marks are 30%.

Q2: Use the FCF Valuation Template below to modify the analysis in the case, Ex. 6 (incorrectly labeled Ex. 5), calculating and defending an estimate of Crocs value. Soln: The preferred method to determine a company’s going-concern value by adjusting for risk and time. Simply put, the value of equity = value of firm – value of debt. So to find the intrinsic or fair values of Crocs, the forecast numbers from exhibit 6 were plugged into the provided template and appropriate entries from the balance sheet and income statement were entered. Assumptions: The depreciation and amortization amounts, capital expenditures were pulled directly from exhibit 6 assuming them to be incremental. Other assumptions include the discount rate at 10.96%, the long-term growth at 6%, and market value of debt as zero and no redundant assets. The firm will have perpetual growth after 4 years at a rate of 6%. The free cash flows along with terminal value calculated are listed below:

We use the Capital Asset Pricing Model (CAPM) to determine the cost of equity. As