Reference no: EM132872650

Questions; Discuss all the questions

1. Discuss the key differences between weighted return and simple return to shareholders.

2. Market efficiency hypothesis implies that the expected average value of variations in the shares is zero. Is it correct that the best estimate of the future price today, as it incorporates all the available information?

3. Discuss the appropriate taxes to use when calculating the free cash flow (FCF )it is the marginal tax rate or the medium tax rate of the leverad company?

4. An investment bank affirms that the VTS ( value of tax shields) of my company is equal to each year's VTS using the WACC as a discount rate . I told them I have never seen such calculation of the VTS but they answered that it was habitual practice. Is that true?

5. A consultant is valuing accompany I set as an objective (entertainment centre) by discounting the cash flow until until the end of the dealership at 7.26% (interest rate year on 30 year bonds = 5.1%; market premium = 5% and beta =0.47%). 0.47% I s a better provided by Bloomberg for kinepolis ( the company whose activity is the management of several cinemas in the EU ,)in the function of Dax index. Is it correct to use the beta kinepolis in this valuation?

6. When valuing the shares of the company, I calculate the present value of the expected cash flow to shareholders and I add to the results obtained cash holding and liquid investments. Is that correct?

7. Our company (A) is going to buy another company (B). We want to value the shares of B and, therefore, we will use three alternatives of the structure Debt/shareholders' equity so as to obtain the WACC :1) present structure of A;2)Present structure of B, and 3)structure used by A to finance the acquisition B' shares . We will value the company B by applying these three alternative and then take as a reference the average of the results. is it correct?

8. The market risk premium is the difference between historical returns on the stock market and the return on bonds. But how many years does "historical" imply? shall we use arithmetic means or geometric one?

9. Discuss the following views;

i) The reasonable thing to do is to finance reasonable assets (collections, inventories) with short term text and fixed assets with long term debt.

ii) A company creates value for its shareholders during a year if it distributes dividends or if the quotation of the shares increases