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You are valuing multiple steady-state companies in the same industry. Company A is projected to earn $160 in EBITA, grow at 2 percent per year, and generate ROICs equal to 15 percent. Company B is projected to earn $100 in EBITA, grow at 6 percent per year, and generate ROICs equal to 10 percent. Both companies have an operating tax rate of 25 percent and a cost of capital of 10 percent. What are the etnerprise-value-to-EBITA multiples for both companies? Does higher growth lead to a higher multiple in this case?
Assuming that prospecting and drilling take no time, what is the optimal oil exploration strategy for the firm (that is, where should it prospect, and when should it drill)?
The investment allocation is suboptimal if another portfolio composition offers: Higher expected return, Lower systematic risk, Lower expected return for a given level of risk.
Account Analysis, High-Low, Contribution Margin data on occupancy and costs at the Starlight Hotel for June, July and August are shown below:
Phoenix Corporation common stock is at present selling for $20 per share. Security analysts at Smith Blarney have assigned following probability distribution to the value of Phoenix stock one year from now;
In 1965, Warren Buffett get control of a New England textile business called Berkshire Hathaway for about $10 per share. Today the stock sells for around $135,000 a share and Mr. Buffett is the 2nd richest person in America.
What will be the value of these securities in one year if the required return declines to 8 percent?
The firm's beta is 1.4, the risk-free rate of return is 2.6%, and the market risk premium is 6% per year. What is the stock's fair market value?
A stock has yielded returns of 6 percent, 11 percent, 14 percent, and -2 percent over the past 4 years, respectively. What is the standard deviation of these returns?
Illustrate out the term underlying as it relates to derivative financial instruments? Write down the main distinctions between a traditional financial instrument and a derivative financial instrument?
What is the maximum price that the company should be willing to pay for the new fleet of cars if it remains an all-equity company? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Briefly explain and identify the three types of cost estimates. Cite any pertinent examples from your own experience in working with these types of cost estimates.
Determine how you plan to create an investment portfolio. What steps do you plan to undertake to create your portfolio? How do you plan to weight the portfolio? How do you plan to account for risk?
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