Université Catholique de Louvain LSMS 2100 Advanced Finance Professor : Marc Deloof Assistant : Gaël Imad Eddine First Assignment : Dell Data Case Group : Bauchau Laurent : 23890600 Janus Guillaume : 41140600 Lenoble Daphné: Van Ossel Sébastien : 27850600 Academic Year 2009-2010 1. Introduction In this first assignment, we have been asked to value a new Dell’s project. In order to do this, we will use two of the most-used measures for evaluating projects which are respectively the Net Present Value (NPV) and the Internal Rate of Return (IRR). However, if we want to be able to calculate such measures we will have to first compute the Free Cash Flows that the project will generate now and in the future. Now, to compute these cash flows, we will to work step-by-step.
a. b. What is the minimum level of synergies for Vodafone shareholders to at least break even on the deal? Estimate the market’s assessment on December 17, 1999 about the likelihood that the deal will succeed. To do so, construct a merger arbitrage position where you buy one Mannesmann share (at the price prevailing on December 17, 1999) and sell short 53.7 Vodafone shares. Assume that the deal finalizes in 3 months time and a risk—free interest rate of 5.5%.
Read the "JET Copies" Case Problem on pages 678-679 of the text. Using simulation estimate the loss of revenue due to copier breakdown for one year, as follows: In Excel, use a suitable method for generating the number of days needed to repair the copier, when it is out of service, according to the discrete distribution shown. Repair Time P(Y) Cumulative RN Range 1 0.20 0.20 01-20 2 0.45 0.65 21-65 3 0.25 0.90 66-90 4 0.10 1.00 91-99,000 In Excel, use a suitable method for simulating the interval between successive breakdowns, according to the continuous distribution shown. In Excel, use a suitable method for simulating the lost revenue for each day the copier is out of service. Put all of this together to simulate the lost revenue due to copier breakdowns over 1 year to answer the question asked in the case study.
Once the predicted demand is frozen, L.L. Bean uses its historical demand and forecast data to analyze the forecasting errors. The forecast errors are calculated for each individual item and a frequency distribution of these is made, which is further used as a probability distribution for future errors. Thus, if 50% of the errors were within 0.7 and 1.6, the forecast for this year would be adjusted accordingly. Next, each item commitment quantity was calculated using its contribution margin and its total contribution in dollar to the revenue of the company.
The project requires $267.9 million to fund six locomotives and seven train sets and have three options to acquire the equipment: 1) issue debt to finance the purchase, 2) lease the equipment using a leveraged-lease structure, or 3) use federal grant monies. A discounted cash flow analysis on the three options has been performed to determine the most cost-efficient option. We will assume two potential scenarios when analyzing the options: 0% tax rate (operating at a loss) and 38% tax rate (operating with a gain). Discussion: Amtrak could issue bonds with a 20-year term at 6.75% per annum to purchase the equipment. They would make semiannual payments of $12.303 million and can sell the equipment at the end of its 25-year useful life at $40.185 million.
They may take a gander at income and contrast it with financial markers, or may take a gander at different pointers, for example, the quantity of new stores an organization opens or the quantity of requests for the merchandise it produces. Financial analysts use forecasting to extrapolate how patterns, for example, GDP or unemployment, will change in the impending quarter or year. The farther is forecast, the higher the chances that the evaluation will be less precise. In order to forecast Apple's income statement accurately, it obliges a top-line down way to deal with Apple's direction. You need to start the examination by taking a gander at Apple's income direction.
To provide the reader with an overview and analysis of the profitability and performance over a 10 year period (2001-2010) 2. To assess and draw conclusions upon the extent to which strategy decisions made by Caterpillar Inc. influenced the profitability and performance of the company over the same period. To fulfil these aims, this report will firstly provide some brief background information on the industry in which Caterpillar operates, Caterpillar as a corporation itself, and a key competitor, Komatsu. The following section will give an overview of the financials from 2000-2010, using key performance indicators to determine the overall profitability and performance of Caterpillar in the period. The third section will provide an in depth analysis of Caterpillars publicised strategies from 2001-2010.
Apparently, her calculation is wrong. To find the cost of debt, we should use the yield to maturity approach: PV=t=1Tc×FV(1+y)T+FV(1+y)T Nike’s bond with a current price of $95.60 will expire on 2021. If the NorthPoint Group decides to invest in 2001, interests will be paid semi-annually for 20 years at a rate of 6.75%. Thus we can calculate the current yield to maturity of the bond to represent the cost of debt before tax as following: 95.6=i=1406.75%×100(1+y)40+100(1+y)40 Question 4: What is your estimate of the debt cost of capital? According to
It also refers to the worth of the asset. The relevance of market value to accelerated depreciation is that market valuation through accelerated depreciation creates a market for used assets and their sell until they are valueless. Inter-period tax allocation becomes present when there are differences between income tax rules and GAAP rules. An example of this is shown in inter-period tax allocations relevance to depreciation. Depreciation for income tax is based on income tax code and requires that equipment be depreciated over 7 years.
- Advanced Corporate Finance Vodafone – Mannesmann Case On the support of the Vodafone shareholders for the presumed merger with Mannesmann Question 1: It is assumed that the share price on December 17, 1999 is based on a 60% chance of the synergy effects playing out and a 40% chance for stock prices to return to the levels of October 21, prior to the first merger announcements. Given the available data for the shares outstanding on November 19, 1999, which we assume to be applicable from October 20 onwards, when the acquisition of Orange became definitive, we can calculate the synergy benefits. [pic] With the help of the above table in which we calculated the market capitalizations of the two separate companies and the merger in euro’s, we derived the synergy benefits Vodafone‘s shareholders would eventually reap in case of a merger. These benefits can be calculated using a simple equation in which the December 17 share price is based on a 40% chance of prices falling to the levels of October 21st and on a 60% chance of prices amounting to the combined levels of October 21st prices and the price effect ascribed to the synergy benefits. This follows a 60% success chance of the Vodafone-Mannesmann merger.