Essays on Present Value

Part one

How has the composition of federal and state and local government spending changed over the past 40 years? What social and economic factors might have contributed to this change in how governments spend their funds? The government has been changing its spending in the last forty years. In 1970’s almost half of federal spending was on defense and around 15% on healthcare and social security. Fast forward, in 2000’s health spending and social security exceeded spending on defense. In 2001 expenditure on defense fell below 20% the total federal budget. Besides, health spending by state and local ...

Abstract

Decision-making under risk occurs when there is an uncertainty about the states of nature that can occur, but the probabilities of each of the states of nature occurring have already been determined. We can use these probabilities to determine additional strategies for decision-making. One such strategy is the Expected Monetary Value (EMV) approach for making an optimal decision. In the problem where the company had to decide on the right investment approach, the company had already done research to determine the various possible states of nature for each of the alternatives as well the probabilities of each of these ...

Investment Appraisal

Investment Appraisal This report presents the critical investment appraisal of the new coffee shop venture to be initiated by Tesco Ltd. The report includes a thorough analysis of the café market and industry and also attempts to evaluate the target market and market segmentation. Towards the end, the report also includes the appraisal of the investment and financial analysis of the five-year forecast of the venture.

The British coffee market has grown considerably in the past few years that is evident from the fact that approximately $8 billion was spent by Britons in coffee shops last year. In 2015, ...

BUSINESS DECISION MAKING

Business Decision-Making Question 1

Another key feature that may hinder effective launch of the project within a period of 12 weeks is that some of the activities are considered as being critical for the project leading to a situation where the management may opt to focus more on such activities. It would be important for the management to ensure that it takes caution as a way of promoting overall success when dealing with critical activities. From the list of activities, the earliest activity will be activity D, which focuses on the assembly of all the key items that would ...

The goal of marketing activities, ultimately, is to create and deliver value to existing and potential customers. At the core, value in a marketing context, is defined as the net difference between the total expenditure that a business organization makes and the cumulative revenues generated from the sales/utilization of a product or service. From the end-user’s perspective, value is a more subjective concept in that it is extent of the benefit that an individual derives from purchasing, using and consuming any brand (Möller 913). An important point that marketers need to understand is that every member of ...

(a)Discuss the conceptual merit(s) of each of the date-of-issue balance sheet presentations shown above for these bonds. (b)Explain why investors would pay $1,085,800 for bonds that have a maturity value of only $1,000,000. The difference between the present value and the maturity value of the bond depends on the interest rate and the coupon rate. If the coupon rate of a bond is greater than the yield to maturity rate, then it will trade at a premium to its face value. Therefore, it is clear that the bonds of Nicholas company are ...

Investment Proposal for Cengage Learning, Inc.

Executive Summary

Purpose of the Paper The main purpose of the paper is to prepare an effective investment appraisal for Cengage Learning by using various financial management tools.

Overview of the Paper

The paper comprises of following material that can be seen in the overall paper. Investment appraisal techniques for introducing new product line Selection of two most common techniques Importance of techniques through literature Testing of Feasibility of new project Interpretation and conclusion on the analysis Techniques Used Results It is found from the above two analysis that the project is viable for the company and has potential to provide high return ...

Introduction

Capital budgeting assists sports organisation in assessing the viability of their proposed long-term investments (Chandra, 2014). Sports organisations also need to invest in capital projects for expansion as well as to improve the efficiency of their operations. Extreme Sports Company operates a sports training complex with a fitness centre, motorsport cars for hire, among other services. The company has some money to invest in the expansion of either the fitness centre or the motorsport unit. This paper highlights how the company can use capital budgeting techniques to evaluate the two investment options.

Details of the two projects

The motorsport car will cost $200,000 ...

Value Chain

The objective of analyzing Monster’s value chain is to make a product that will become popular to its customers, which includes not only the production segment but also marketing and distribution (Horngren and Data, 2015). This is because products will eventually need to be discontinued due to changing customer preferences and product innovation from competitors. This means that the company’s core operations and its products must continuously evolve and this could be done using the value chain analysis tool. For an energy drink company like Monster, one of its main goals is to continuously adapt to the ...

Chapter 1: Introduction 3

Chapter 2: Financial Performance and Position of TESCO 6 Chapter 3 Financial Management Policy 14 Chapter 4 Investment Strategy 18 Chapter 5 Valuation of TESCO 22 Chapter 6 Conclusion 26 Abstract The present report provides critical analysis of financial positioning of Tesco Plc. For this, the financial data has been gathered for past five years as well as its competitors to critically assess financial positioning of Tesco in the retail industry. The reports highlight the recent issues of Bretix which has significantly impacted economic conditions of the United Kingdom leading to declining the consumer confidence because of triggering inflation. ...

Question 1

The Verizon’s IT-project approval process is being done under the Capital Program Planning section of the telecommunication company. It is the main component responsible of the planning process, in which it includes the company’s strategic initiatives in order to create a long-term plan for the maintenance of the resources and other important things which are needed by the information system. Generally, the Capital Program Planning is divided into three sections: the project identification, approval, and funding (Capital and Maintenance Planning, n.d). Though it seems that the second part covers the approval part, the other two sections are ...

Identification of opportunity cost and sunk cost

Sunk Cost refers to the cost that was incurred in past and cannot be altered through new decisions . It can also be called as irrelevant cost for decision making purpose since it has been incurred and it does not make any difference if the proposal is accepted or rejected. In the case of Tom, the sunk cost relates to the house purchase. During 2004, he has purchased the house in $500,000 which at present has worth $375000. The sunk cost here will be $125000 ($500,000-$375000). Opportunity cost refers to the benefits forgone due to the selection ...

Introduction

Capital budget analysis refers to the process through which the way a firm invests capital in projects that result in cash flows over a period of more than one year. The analysis is built on the assumption that the firm depends on the specific project or projects under analysis in order to operate and consequently, it becomes important to test whether or not the projects being considered would be viable. Notably, capital budget analysis comes with several assumptions including the estimations of cash flows from the specific project as well as the assumption on the state of the economy ...

The evaluation of the company’s project or product can be carried out using Net Present Value (NPV) analysis. The NPV analysis involves forecasting of future cash flows that the business expects to generate from the new project or its product. The cash flows are discounted using an appropriate discount rate that is the cost of capital of the company. The cost of capital is the cost of funds acquired by the company from different sources including equity and debt. The sum of present value (discounted value) is deducted from the initial investment cost to determine the net present ...

Introduction

The choice of capital budgeting methods to be applied by companies defers and at times both recommended and non-recommended methods are commonly utilized by some large corporations which rely more on capital budgeting. The choice of the method to be applied is also influenced by growth opportunities, foreign sales, characteristics of the Management, industry, leverage, dividend payout ratio and growth opportunities and so forth (Blackstaff, 2012). It's good to note that, there exist various methods used to determine investment decisions, the choice is, however, not arbitrary (Blackstaff, 2012). According to Fabozzi and Ake (2013), Many professions in the field ...

Chapter 9 questions

Question 1

The discounted cash flow valuation approach determines the value of a firm by discounting the expected cash flows from the firm (Voss & Larrabee, 2012). The value of any firm or asset should be equal to the present value of the cash flows expected from the firm or asset. Since the firm’s value is determined today, the least an investor would be willing to pay is the present value of the sum cash flows expected from the enterprise (Voss & Larrabee, 2012). Discounting is based on the time value if money. A firm will generate a stream of ...

at Rex Hill Winery

Management of Rex Hill Winery has been highly concerned about climate change. They have heard about the Solar Sprint campaign to go solar now before the federal tax credit expires at the end of 2016. They also knew about the other incentives available on installation of solar electrical systems. Considering environmental benefits, they desired to install a PV solar panel system at their property. However, they wished to take a final decision on the project based on a feasibility study. As Rex Hill’s consultant, I have been entrusted the job of preparation of a ...

QUESTION A

Credit Default Swap It is a financial instrument lenders use to hedge default risk. The lender acquires a CDS and pays premiums to the CDS seller who takes the default risk (Lasher 200). If the borrower defaults, then the CDS seller pays the par value of the loan to the lender. The CDS seller also pays the protection buyer accrued interests on the loan during the intervening period.

Cash flows in case of no default

Annual CDS premium = 4% × 1,000,000 = $40,000 Quarterly payments = 40,000/4 = $10,000 A will pay quarterly CDS premiums to B for the three years. At the end of ...

QUESTION A

Definition of Credit Default Swaps A CDS is an instrument used to transfer the risk of default or credit exposure between two or more parties (Fabozzi and Kothari, 2008). It protects the lender from the possible loss of default by the borrower. The lender (protection buyer) pays premiums to the CDS seller. In return, the CDS seller guarantees to pay the lender the face value of the loan plus interests due in the intervening period if the borrower defaults.

Cash flows

Annual CDS premium = 4% × 1,000,000 = $40,000 Quarterly payments = 40,000/4 = $10,000 The borrower does not default ...

QUESTION A

A Credit Default Swap is a swap that protects the lender from the risk of loss resulting from the default by the borrower. The protection buyer of the CDS (the lender) makes periodic income payments (CDS premiums) to the protection seller who in return guarantees to pay the lender the principal in case the borrower defaults.

Cash flows when there is no default

Notional amount = $1 million Annual CDS premium = 4% × 1,000,000 = $40,000 Quarterly CDS premium = $10,000 If the borrower does not default, the protection seller will make a profit of $120,000 at the end of the third year ($10,000 ...

About the report

The objective of this report is to assist One-World Investment Consortium, who is planning to invest £150 million in Thomas Cook PLC, a British global travel company listed on the London Stock Exchange under the ticker sign of ‘TCG’. We duly understand the impact of our professional recommendation on Consortium’s final decision making related to investment, and therefore, we intend to be comprehensive in the approach our analysis. As for the structure of this report, it will be a two-part report. In the first section of the report, we will evaluate the past 5 year(2007-2011) financial performance ...

Even though we may or may not notice, but the concept of time value of money surrounds us all the time in the form of compounding. The concept of time value of money asserts that the present value of a dollar received today is more than the one to be received in the future. In other words, money has the power of compounding and no rational person will forego his consumption without being compensated for it in the form of interest. For instance, if a person invest his funds in bonds, he is rewarded with fixed coupon payments on ...

Abstract

A patient survey at a community hospital in which I serve as the chief financial officer indicated the need for a commercial 24-hour pharmacy within the hospital. The pharmacy would ensure that patients and families fill prescriptions and begin taking prescribed medicines as and when ordered instead of waiting for the following day. In response to the findings of the survey, this paper seeks to look into the viability of the business. Herein provided is the proposal for the first three months of operations. The paper also looks into the financial implications of the proposed project by looking into ...

Financial management is effective management of monetary resources of the organization. It helps the organization to plan, organize, direct, monitor, and control the financial activities efficiently and run the operations smoothly. I have learned different concepts of financial management in the class. I have learned that financial ratios play are useful in accessing the business performance and provide information about the company’s financial situation. The application of financial ratios allows examining the financial structure of the organization and comparing it with other competitors. I have understood that it helps the financial analyst to implement different strategies and improve ...

LIMITED LEVERAGE

One thing that is clear from the vignette is Frank does not want to close his business and work for someone else. However, he must replace his primary asset, his truck, or he will be forced to close the business. Since he does not have the equity to purchase the truck, he must find the funds somewhere else. The only options are to find an investor or borrow the money. The vignette mentions nothing about an option to find an investor. He is adamantly against using debt. His daughter Stephanie suspects he does not know the proper use of ...

INVESTMENT ANALYSIS OF VIETNAM

INVESTMENT ANALYSIS OF VIETNAM

Summary

Vietnam has changed in the last thirty years from an agrarian country to a service and manufacture country leader in the world in growth and economic activity. The country has a communist system legally but, in the practice, the country has a liberal policy in the economy signing the Trans-Pacific Free Trade Agreement but maintaining the political control under the rule of one party. The country offers opportunities and risks for individual and corporation with the intention to invest.

Introduction

Vietnam is known in the world as the country where United States of America lost a ...

About the report

The report is commissioned to ascertain the financial viability of the capital project being considered by North Sea Oil. As part of this project, we will calculate the Net Present Value(NPV) and Internal Rate of Return(IRR) of the projects under two different set of cost of capital, and will comment as how the change in capital structure will affect the shareholders accordingly. The eventual purpose here is to come up with a prudent recommendation for the company as which project will be more profitable for the company and what proportion of capital structure will be more viable ...

PROFFESOR

b. According to calculations of Net Present Value the Project Alpha has a better value for the company, than the project Beta. d. With the calculation of Internal Rate of Return, the better project is the project Alpha. g. The Net Present Value represents the best tool to calculate the return on an investment or effectiveness of a project; the Net Present Value considers all the cash flows of the project and the economic conditions of the environment where the project will be developed (Boyte-White, 2015). The use of the Weighted Average Cost of Capital represents the internal conditions ...

The primary goal of every investor is to maximize his returns. To determine the right company to invest in an investor require analyze the performance of a company using various tools which include the financial ratios analysis, cash flow analysis, risk analysis, stock valuation and time value of money. This paper provides a detailed analysis of an investor who has 100,000 and is in differenced between saving the money in a saving account or investing it in stocks of 3M company which is a manufacturing and mining company producing over 55, 000 products.

Use of Financial Ratios

The liquidity ratios shows the ...

Saving v/s Investment

Although used interchangeably, the terms savings and investment differs significantly. Important to note, the term savings refers to short-period investment in highly liquid products that allow the depositor/investor to access money any time or with minimal hassle. Some of the saving based instruments available for the investors are saving account, certificate of deposits, checking accounts,et cetera. Another notable feature of saving is that the money deposited is insured by the Federal Deposit Insurance Corporation (FDIC). Therefore, a saving carries minimal risk as in any condition,i.e. even if the bank defaults, the deposit will be safeguard up to ...

Business Decision Making 3 of 3

A Gantt chart is a scheduling technique used to assign a time scale and sequence to a project or plan. A Gantt chart comprises of horizontal bar charts drawn to scale for every project activity. The length of the horizontal bars shows the time to attain completion (Ghionea, 2014). The steps involved in the creation of Gantt charts include the establishment of horizontal axis to represent time, use of vertical axis to represent activities, and representation of each bar using suitable length. The activities represented by the Gantt chart include lot preparation, creating footings, establishing foundations, and framing. Figure ...

Net present value

NPV is gotten by subtracting cash outflows from the sum cash inflows from the project investment. To get current values, a discounted rate used which is the rate of return or the opportunity cost of capital. The opportunity cost of capital is the rate of return that an investor could earn if the money would have invested in financial assets of equal risk (Gollier, 2009). It’s therefore, the return that an investor would expect to receive. It’s vital in capital budgeting because of the determination of the expected profits from the projects to be invested if approved ...

Introduction

Sharp Park, which is named after George Sharp, has a long, rich history. Mr. Sharp owned a more than 400-acre estate that he established with a vision for the San Francisco residents to enjoy recreation in a natural setting. When he died together with his wife, the property was left to the San Francisco City Council under strict instructions that it would only be used for recreational purposes. Sharp Park is in California off Highway 1 along the Pacific Ocean, San Francisco. It has existed since 1917; the golf course was established in 1930s. In 1941-internment camp was established ...

Recommendations to the Restaurant Manager

In the current state, the restaurant is profitable. The break-even point is 89,474 covers with a margin of safety of 10,526 covers, and the net profit is £60,000. This implies that the restaurant sales have to fall, by at least 10,526 covers for it to start making losses. The manager has several considerations to make on measures to improve the profitability of the restaurant. The available options and offers are discussed below.

Reducing the price to £10.00

If the price is reduced to £10.00, there will be a rise in sales to 12,000 covers. The contribution margin will fall ...

1. The calculation of the true value of the Tri Star program is developed using the Net Present Value concept which depends on of the future net cash flows of a project or company. The Tri-Star Program started in 1967 with the pre-production phase until 1971. After 1971 until 1977 is the production phase of the L-1011 Tri-Star program (HARRINGTON-CRESSMAN, 2015). The true value of the program is the net present value that includes all the net cash flows in all the periods of the program, project or enterprise. Assuming a plan of 210 aircraft for the production phase, ...

Investment analysis

In order to choose which option is the best, there is a need to calculate at first Net Present Value and pick the one with the biggest value: Option 1: to add a new window: NPV (1) = 44,0001,15 + 44,0001,15 x 1.15 + 44,0001,15 x 1,15 x 1,15 – 75,000 = 38,260 + 33,270 + 28,930 – 75,000 = 25,460 $.

Option 3: to build a new stand: NPV (3) = 70,0001,15 + 70,0001,15 x 1.15 + 70,0001,15 x 1,15 x 1,15 – 125,000 = 60,869 + 52,930 + 46, ...

Calculating Present and Future Values

Some of the primary factors that one must consider when calculating present and future values are annuities (ordinary annuity and annuity due). The other qualitative factors that contribute to making the decisions of both present and future value includes the frequencies (number) of payment, or of payments and the time at which the person makes the payments. In most cases, people make payments either at the start or end of every period payment. These are the variables that one has to consider when making Present and Future Value calculations. In the case of flexible interest rates, he or she ...

JPMorgan Chase & Co is a commercial and an investment banking institution based in the United States. It was formed in 2000 when Chase Manhattan Corporation merged with JPMorgan & Co. It is one of the oldest and well known banking institutions in the USA and leads in investment banking, commercial banking, small businesses and financial services for its customers (Weston, Mitchell, & Mulherin, 2013). The company operations in the recent years is characterised by increased international activities and operation in its business. It is divided on business segments on a line of business. The parent company is the head office where ...

Methods

The search or an alternative source of energy is needed due to the increasing populations of the world, higher demand in electricity and the depletion of the resources of the Earth. The whole scope of the available solutions was available through the study of journals, scientific magazines, online articles and periodicals, and books on the topic of applying alternative sources of energy so as to find the best possible solution In view of the global warming problem, this issue has been extensively studied by many scientists. I will utilize their vision on some available alternatives.

This is needed in order to determine which solution will best mitigate and facilitate the solution to the problem.

In order to determine ...

Re:

Anyone who needs to perform time value of money calculations Definition A financial calculator is an instrument used to perform time value of money calculations in the finance and business environment The purpose of a calculator is to perform math calculations. If you press the “2” key, hit the “+” button, press the”2” key again and hit the “=” button, you will see the number 4 as the result. Of course we don’t need calculators for simple calculations like this. We need them for the more complicated ones that could take hours to do by hand, thus increasing ...

Introduction

In financial management, the finance managers primarily make several kinds of decisions including investment decisions, financing decisions, routine decisions and dividend decisions. For this case, the paper focusses on dividend decisions. The paper shall evaluate the theoretical framework and empirical evidence that examines the relationship between the firm’s dividend policy and its market share price. Quantitative business analytics refers to application of mathematics and statistics to solve business problem. From the definition, it means that one to define the business problem to solve first then apply the relevant techniques. In this case, the paper hopes to understand the ...

Executive Summary

The paper discusses different topics related to the field of corporate finance and how the same will impact my future career, during which I plan to work as an equity investor. Beginning with the paper, I first discussed the importance of the financial statements and what information they reveal about the company. However,more than reading these financial statements, it is important that we learn how to study the financial statements using the tool of common-size statements and financial ratios as these tools help us in evaluating the trend in the financial standing of the company. Thereafter, I discussed ...

Evaluation of franchise investment

The franchise investment project is evaluated based on the net present value and the internal rate of returns. The available information is used to determine the NPV and IRR of Schneller Zug and Kyuko Densha. The two measures are used to assess whether each project is viable. NPV and IRR also help in choosing the better project between the two. NPV and IRR are determined using the cost of capital for Javelin Railway Co.

Determination of the cost of capital

The cost of capital is the return investors require from investment to secure funding. It is the minimum return projects must generate to be funded ...

1. When I was at the high school, many professors said to me the importance to acquire managerial skills to grow in organizations and to have financial skills to have control of my finances. I did not have the intention to abandon my career because I love the idea to design and develop new products, but I knew that a 9-to-5 job does not have the possibilities to convert me into a rich person, but at least I wanted to develop the financial skills. In 2005, when I finished the high school, I started to work in a restaurant ...

Question No. 1 - Statement of the Incremental Cash Flows over 8-Year Period

Based on the given information and data, the following statement is extracted to reflect incremental cash flows for each year accompanied by a table showing calculation of depreciation expense using straight line method:

Question No. 2 - Payback Period (PBP) and Net Present Value (NPV)

Payback Period (PBP) The period within which the initial investment in project could be recovered represents the Payback Period (PBP). The criteria of making investment decision in case of this capital budgeting technique is that any project that has a Payback Period (PBP) beyond the one “required” by the business is ignored. In the same manner, only those projects are accepted that help an organization recover ...

Introduction

We know that the money we are having in hand now is more valuable than the money collected later. This is due to the fact that we can make money right now by putting the money in business, purchasing something, selling it later like stocks or depositing in the bank to earn interest. But the future money is always less valuable. This is known as time value of money (TVM). Future money is always less valuable due to inflation. So how do we compare the value of money now and the value of money in the future. This is ...

Introduction

Graham and Harvey surveyed about 4,440 firms chief finance officers, and only 392 reviews came back. Large enterprises rely primarily on present value methods, capital structure and capital asset pricing models whereas small businesses likely use the payback period technique (Graham 12). Companies are more concerned about sustaining financial flexibility, healthy credit rating, stock appreciation, and EPS (earnings per share) dilution, especially when the entities are issuing equity. Little evidence was also found that organizational executives have a great concern about asymmetric information, personal taxes, free cash flows, and asset substitution. There is also some support for trade ...

Dear Texas Bob,

The calculations made were based on formulas we deem fit. In obtaining the income, we used the cash flow method, which is simply the difference between the cash that flows in versus the cash that flows out of the business. That method would prove to be more accurate since in the retail food industry, cash is considered king. Likewise, we discounted the values using the present value formula. We deem it important that the time value of money shall be considered to accurately reflect the amounts, not in a nominal sense, but in its real sense. Lastly, we also ...

National saving is regarded as an income of nation, which is not utilized on government purchases or on consumption (Mankiw, 2009). Private saving is a name given to savings that is left with household after paying for consumption and taxes. Public saving is considered as tax revenue amount that is available with government after making all payments for its spending. However, the three variables are associated with each other in a way that national saving is equal to public saving and private saving, which can be considered from following equation S = (Y-T-C) + (T-G) National Saving = Private Saving + Public Saving ...

Introduction

The pricing strategy should be an integral part of decisions in the marketing position, and it should depend on the overall development strategy of the business and marketing plans. Therefore, companies should not set one price but a pricing structure that should reflect on the variations in geographical demand, costs, the timing of purchase, requirement of market segments, order levels, the frequency of delivery, and service of contracts.

Why different pricing strategies are appropriate in some circumstances

Pricing is an important managerial decision, and most firms do not encounter pricing decisions in major ways on daily operations (Weygandt, Kimmel and Kieso, 2009, pp.59). However, there is a need ...

Phil Mark Consulting

Harris Jackson Dear Sir, RE: Decision regarding the choice of contract between San Francisco 49ers and Dallas Cowboys I am writing this letter regarding the contract decision for Mr. Harris. Based on the cashflows that Mr. Harris will receive from either of the teams, I used the Net Present Value method to determine which contract will serve Mr. Harris’ financial interests. I chose the San Francisco 49ers contract over the Dallas Cowboys one based on the expected cashflows from either of the teams. I forecasted the cashflows at the given current discount rate of 8% which factors in the ...

Part One

Risk There is no standard way to define risks. However, one of the definitions of risk is the probability that the return on an investment will be lower than the expected return (Business Dictionary, n.d.). Examples of risk include business risk, transactional risks and exchange rate risk.

Beta

Beta is a measure of systematic risk of a stock. The value measures the volatility of the stock compared to the volatility of the market (Forbes, n.d.). The value of Beta can be either positive or negative while the beta value of the market is always one. As such, in interpreting the ...

Net Present Value

The Net Present Value is used in estimating the potential value of every project by applying the discounted cash flow valuation that requires an estimation of the size and time of all cash flows that increases from the project (Ehrhardt & Brigham, 2016). However, NPV is affected greatly by the discounting rate. Therefore, making a selection on the proper rate that is sometimes known as the hurdle rate is essential during decision making. Moreover, this should make a reflection on the riskiness of the investment because it is typically measured by the unpredictability of cash flows. Therefore, it must take ...

At the inception of a capital lease, the lessee should recognize the value of the asset and the liability of the capital lease equivalent to the present value of the lease rentals and bargain option (Simple Studies). The relevant discount rate is the lessor’s implicit rate or the leases after tax cost of borrowing (Simple Studies). The lessee will then depreciate the asset in the same way as a purchased asset. The accounting entries at the inception of the lease are as follows:

Dr Cr

At inception: Asset PV of lease obligations Liability PV of lease obligations At end of ...

Limited leverage and business

A majority of small business are discouraged from having high leverage ratios. In this case, Frank having a small proprietary, is unaware of the benefit that the business might be having with leverages. Subsequently, his fears are based credit being expensive. According to McCabe and Yook (2011), with the cost of finance fixed, the increased revenues attributed to these credit finance, offers cushion on writing off the loan because it will generate more earnings. However, it is only when well managed that credit will be of advantage to the company or business. In excess, the liability increases the third ...

Business Finance Finals

The situation presented in the situation with client one is the for a business to survive a proper cash flow should be in place. The behavior of the person involve would also be barrier or a good mark on how they handle their financial management. As this is noted in the study of (Almeida, Campellow and Weisbach. 2004) in which they captured that “two important areas of research in corporate finance are the effects of financial constraints on firm behavior and the manner in which firms perform financial management”. In the line of the different of profits and cash ...

Question 1: Olter’s Beta coefficient

Olter’s Beta can be determined using the Capital Asset Pricing Model. The required return on the average stock is the market return while the average return on Olter’s stock is Olter’s required rate of return. Beta = (Expected return – Risk-free rate)/ (Market return – Risk free rate) = (13-6)(13-6) = 1.0

Question 2: Effect of Beta coefficient on stock price

Beta is a measure of risk and gives the variability of a stock’s return (price changes) in relation to the variability of the overall market. Since it represents the stock’s risk, Beta influences the prices of stocks. Under the Capital Asset Pricing Model, Beta is ...

Analysis of Energy Sufficiency, Sustainability and Conflicts of US Forests

Abstract The focus of the paper is to analyze the economics of US forests. In particular, the paper analyses the energy sufficiency, sustainability, as well as potential conflicts regarding this essential us natural resource. Concerning forest sustainability, the paper will consider issues such as how the US can use and retain forests to meet different human needs, how it can preserve and promote healthy forests, and how the country can make ethical choices concerning forests. Key findings in the paper reveal that although the United States has shown some efforts in creating sustainability concerning forests, there is still much ...

Arnone notes that planning for retirement has become more important today because many employers have moved away from the defined benefit pension plan to a defined contribution plan (p.3). This means that employees are tasked with the responsibility of ensuring that they save enough during their working life in order to have sufficient savings to meet their post-retirement expenses. Some of the common mistakes individuals take when planning for retirement is to overestimate how much they will receive from the social security or underestimate how long they will live (Arnone 5). Another major mistake individuals planning for retirement make ...

This report analyses the most recent financial reports of two companies; Sino Gas and Energy of Australia (2014), and Solar World of Germany (2015). Sino Gas and Energy reported total provisions of $97,166 that constituted 0.09% of the total assets. Solar World reported total provisions of k€ 49,466 that constituted 5.69% of the total assets. The provisions for the two companies are listed below in descending order based on their book values:

Sino Gas and Energy $

Other provisions 60,837 Employee entitlements 36,329 Total 97,166 Solar world k€ Warranties 24,653 Pensions 10,704 Litigation risks 9,190 Other ...