Present value

KENNECOTT COPPER CORPORATION CASE REPORT 1. Analyze the economic rationale of the Carborundum acquisition. Under what conditions an acquisition would be expected to add to shareholder value in general? Do any of these reasons apply to Carborundum acquisition? Prior to the consideration of Carborundum as an acquisition target, Kennecott, a copper company, pursued an acquisition of Peabody, a coal company, for $285 million in cash in 1968. There are two main rationales behind the acquisition of

For example, net present value (NPV) method could be used to choose among projects which are mutually exclusive or which with different scales; when resources are constrained, the profitability index should be employed. In the following paragraphs, we will introduce several popular quantitative models of investment decision making, including their applications, advantages and disadvantages. 1.2 Quantitative models of investment decision 1.2.1 Net present value (NPV) NPV is defined that

determine whether a stock is undervalued or overvalued? How valid is the discounted present value approach? How can one value a company as a going concern, and how does this change in the context of a potential acquisition, or when the company faces financial stress? Finding a value for a company is no easy task -- but doing so is an essential component of effective management. The reason: it's easy to destroy value with ill-judged acquisitions, investments or financing methods. This article will

activities around the management of money and valuable assets or rather is the business activity with capital funds in meeting financials needs. INTRODUCTION Business aims at building value for its owners, customers and other stakeholders. The value of the output should exceed the costs of input in resources. Resources which make information to flows are reported in financial statements including the cash flow and income statements. Traditional accounting always gets

analysis) 4. Discontinue investing in the exploration and production and sell after 5 years while continuing to invest in the Florida pipeline for the long run. 5. Discontinue the forest product segment today because of the high cost and negative net present value (See Exhibit 5 for details) In the Financial Service

Apache has both an option to defer the exploiting of reserves into future and Apache may also choose not to exploit the MW reserves at all. As some of MW’s reserves are actually real options, the APV valuation method actually underestimates the real value of MW acquisition. If Apache defers the exploiting of the reserves, there exists a possibility for the future cash flows becoming even more valuable. For example, Apache could have more precise

firm’s last dividend was $1.50. If the required rate of return is 12 percent, what is the market value of this stock assuming dividend growth equals the growth rate of the firm? 9.4 Abacus Corp. will pay dividends of $2.25, $2.95 and $3.15 for the next three years. After three years, the firm will grow at a constant rate of 4 percent. If the required rate of return is 14.5 percent, what is the current value of the stock? 9.5 The preferred stock of Wellcare Inc. is currently

Using the calculated WACC and the company’s hurdle rate for this project, under Bob Prescott’s cost savings and additional revenues assumption, the project’s IRR is now greater than the hurdle rate. Furthermore, the net present value (NPV), payback period and the additional value added to the earnings per share (EPS) are shown in Table 4 below. Using just these figures, the project should be accepted.

1. Organizations that decide to issue bonds generally go through a series of steps. Discuss the six steps. There are organizations that decide to issue bonds in most cases go through a series of six steps: 1. The health care physician attempts to get its medical office in order. 2. The health care agency get evaluated by a credit rating agency. 3. The bond is rated by a bond rating agency. 4. The health care physician provides a note or lease to the legislative authority via a trustee. 5

greater than if they were expecting the credit crisis and global recession which were to follow. When the realisation that there was to be the biggest recession since the Great Depression hit, the firms inevitably updated their beliefs on the present value of future cash flows and found that a proportion of accumulated capital would generate a loss due to lower demand causing revenue to fall. The convexity of the marginal-revenue-product of capital with positive, diminishing returns suggests that