Implicit costs in measuring a firms profitability

Assignment Help Financial Management

Reference no: EM13811236

Some major companies live and die by EVA. For example, at General Electric, more capital is allotted only to divisions that pass the EVA threshold, and divisions that regularly flunk are sold off. It’s a simple, but powerful, approach that looks at a company’s numbers from an economist’s point of view and factors in not just explicit costs but also implicit costs in measuring a firm’s profitability.

Reference no: EM13811236

Questions Cloud

Common stock pays a current dividend : A common stock pays a current dividend of 1 dollar, the dividend is expected to grow at a 7% annual rate for the next three years; then is will grow at 5 percent in perpetuity. The appropriate discount rate is 10 percent. What is the price of this st..

Using the indirect method in operating activities section : Prepare a statement of cash flows for 2014 using the direct method in the Operating Activities section. Prepare another statement of cash flows for 2014 using the indirect method in the Operating Activities section.

Assume dividends will continue to grow at rate similar : Over the past 5 years, NBA’s common stock earnings per share have grown from $0.62 to $0.91. If an investor in NBA stock is assumed to have a required rate of return of 14%, what is the estimated value of NBA if its current dividend is $0.12? Assume ..

Calculate the sustainable growth rate : PING, INC. projects a rate of return on equity of 20%. Management plans to pay 70% of earnings as dividends. Earnings this year will be $3 per share, and investors expect a 12 rate of return on the stock. Calculate the sustainable growth rate.

Implicit costs in measuring a firms profitability : Some major companies live and die by EVA. For example, at General Electric, more capital is allotted only to divisions that pass the EVA threshold, and divisions that regularly flunk are sold off. It’s a simple, but powerful, approach that looks at a..

Calculate the expected return on the security : A security has a beta of 1.5 when the risk-free rate is 2.6 percent and the expected return on the market is 12 percent. Calculate the expected return on the security. If the beta on the security in a) increases to 2.5, what is the new expected retur..

What is the profit-maximizing order-up-to level for cash : Jim is a CFO of a mid-sized construction company. One of his key tasks is to ensure that the company has sufficient cash to pay its daily and hourly workers who are hired whenever need arises. What is the profit-maximizing order-up-to level for cash?

About mergers and acquisitions and taxes : In a statutory merger, only assets and liabilities shown on the target firm’s balance sheet automatically transfer to the acquiring firm. Which of the following is not true about mergers and acquisitions and taxes? Which of the following is not true ..

What is present value of all future earning if interest rate : Analysts predict that your company's earnings will grow at 40% per year for the next five years. After that, earnings growth is expected to slow to 2% per year and continue at that level forever. Your company has announced earnings of $2 million. Wha..

User Account

All Pages