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Explain the difference between performing the capital budgeting analysis from the parent firm’s perspective as opposed to the project perspective.
The aim of the financial manager of the parent firm is to maximize its wealth of shareholders. A capital project of a subsidiary of the parent may comprise a positive NPV (or APV) from the subsidiary’s perspective yet comprise a negative NPV (or APV) from the parent’s perspective if fixed cash flows cannot be repatriated to the parent due to remittance restrictions by the host country, or if the home currency is supposed to appreciate substantially over the life of the project, yielding unattractive cash flows while converted into the home currency of the parent. In addition, a higher tax rate in the home country may cause the project to be unbeneficial from the parent’s perspective. Any of these causes could result in the project being unattractive to the parent and the parent’s stockholders.
financial planning?
Reconstruction and effect on share price A listed company facing reconstruction (divestment, demerger, MBO etc) will have informed the stock market in advance and the share pri
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Additional Paid in Capital - Amounts paid for stock in excess of its PAR VALUE or STATEDVALUE. Furthermore, other amounts paid by stockholders and charged to EQUITY ACCOUNTS other
How do we estimate expected incremental cash flows for a proposed capital budgeting project? We calculate expected incremental cash flows for a planned project by estimating the
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explain the significance of operating leverage and financial with the help of example?
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Assemble all other inputs/assumptions based on the past data. Use your best judgment to have the most reasonable estimates. Tasks 1. Prepare an Excel spreadsheet containi
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