Ifa Comparing Between Klci and Nestle

Statement of Purpose: The purpose of this analysis is to determine if Reynolds Metals (“Reynolds”) should accept Nestlé’s offer of $61 million for its holdings of Eskimo Pie. The crux of the issue is whether or not the projected income from a proposed Initial Public Offering (“IPO”) by Wheat First Securities (“Wheat First”) is reasonable and will actually result in proceeds between $61 and $68 million to Reynolds, the Reynolds family and the Reynolds foundation, as projected. To get at this question, this paper will seek to value Eskimo Pie as a stand-alone company, if the IPO option is selected.

Market return is obtained from Exhibit 4, S&P 500 Composite Stock Index Returns of 1926 – 1987 which was 9.90%. the assumption of selecting the returns covering the period 1926- 1987 as this period is long enough to consider various phases of economic and business life cycle that took place during the period and will match the risk free rate under the period of consideration (1926 – 1987)

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

Over the course of time I have been following the three stocks in the fast food industry. I have been following Starbucks, McDonald and Yum Brands. I have collected information on my stocks and their progress. In my research I have found surprising statistics on the three company stocks I chose. In my paper I will explain how the following companies’ stocks I chose and how they did as well as the reasons their stocks affect their current and future progress.

sold at $65 per share less $8,400 brokerage fees. The cost of the securities purchased

Answer: If the dividends increase at the end of the year, the current share price of common stock will increase. Assuming the same growth Rate of 3% and required rate of return at 10.94%. If required rate of return increase to 11%, the current share price of common stock will decrease.

b) What will be the total equity value and equity price per share after the issuance is completed?

TELUS will have big expenditures on capital assets replacement in the next few years. It doesn’t have significant amounts of debt due in recent three years, which will assure its liquidity. However, significant amounts of long-term debt mature in next few years, combing with the capital assets replacement expenditure could probably make readers worry about the company’s future financial situation and consequently feel hesitate to invest in the company. Therefore, they may want to know the earnings per share, which can be calculated from information provided in the shareholders’ equity section. This ratio shows how much rewards investors can get by investing at TELUS. Note 18 (g) p110 provides information about shareholders’ equity. It indicates that TELUS spent a lot of money on repurchasing its outstanding shares to maintain high share price. The financial activities also prove that TELUS has the ability to get loans and pay off its debt.

Figure 1 is an image of what a stock certificate looked like when issued to investors. South Sea Company reissued a new stock price of 400 pounds. The stock eventually rose to 1000 pounds.

Pro-forma income statement and key credit rating determinants are shown in Exhibit 2 and 3 respectively. Remaining share no. of 158.3m after repurchase is based on proportional value addition distribution between cash-out and remaining shareholders and this number is inserted to calculate earning per share and corresponding immediate share price change after announcement of repurchase program. According to Exhibit 3 and industrial average of relevant grades, only fund flow/ total debt and total debt/ capital measures are not comparable with A credit rating. Considering EBIT and EBITDA interest coverage are two most important criteria and equity market value is so substantially different from book value which leads to a healthy

This analysis will identify the current value of the company at a stand-alone value and explain why Nestle Food would want to buy this company and the synergies involved for their reasoning. We will also discuss who will benefit if Reynolds Metals were to sell to Nestle or were to create an IPO.

2. Actual return was calculated for all the companies as well as for the BSE 500 on the event period days (-60 to +60).

As indicated by the case study S&P 500 index was use as a measure of the total return for the stock market. Our standard deviation of the total return was used as a one measure of the risk of an individual stock. Also betas for individual stocks are determined by simple linear regression. The variables were: total return for the stock as the dependent variable and independent variable is the total return for the stock. Since the descriptive statistics were a lot, only the necessary data was selected (below table.)

Even though there are flaws in the CAPM for empirical study, the approach of the linearity of expected return and risk is readily relevant. As Fama & French (2004:20) stated “… Markowitz’s portfolio model … is nevertheless a theoretical tour de force.” It could be seen that the study of this paper may possibly justify Fama & French’s study that stated the CAPM is insufficient in interpreting the expected return with respect to risk. This is due to the failure of considering the other market factors that would affect the stock price.

Economy of countries differs everywhere. So Nestle has to set different economic policies for different targeted segments. The price of the product is an important decision to take while strategizing the economic policies according the inflation rate and the buying power of the segments. Nestle company should made an analysis report on frequent basis to get the knowledge of the inflation rates and different income levels.