FM11 Ch 24 Bankruptcy, Reorganization, and Liquidation

... creditors when liquidation does occur  Companies in bankruptcy can hurt other companies in industry 24 - 24 Chapter 24 Extension  MDA to predict bankruptcy  Recent business failures 24 - 25 What ... or assignee, and then the assets are sold off 24 - 10 Describe the following terms related to U.S bankruptcy law:  Chapter 11: Business reorganization guidelines  Chapter 7: Li...

Ngày tải lên: 06/04/2015, 19:41

... 14 - Financial Planning and Pro Forma Statements  Three important uses: Forecast the amount of external financing that will be required Evaluate the impact that changes in the ... Set appropriate targets for compensation plans 14 - Steps in Financial Forecasting  Forecast sales  Project the assets needed to support sales  Project internally generated funds  Project...

Ngày tải lên: 06/04/2015, 19:41

... leverage provided by options as the underlying stock price increases, and the greater loss potential of options at higher option prices 8 - 13 What are the assumptions of the Black-Scholes Option Pricing ... for the sale/purchase of either the stock or the option  RRF is known and constant during the option’s life (More ) - 14  Security buyers may borrow any fraction of the purchas...

Ngày tải lên: 06/04/2015, 19:41

... ordering costs increase  If Q > EOQ, total carrying costs increase, but ordering costs decrease 28 - 15 Suppose delivery takes weeks Assuming certainty in delivery and usage, at what inventory ... if you view cash as an operating assets, just like inventory  In this view, cash has a carrying cost, which is the opportunity cost for investing the funds, and an order cost, wh...

Ngày tải lên: 06/04/2015, 19:41

... losses)(More ) 25 -  Break-up value: Assets would be more valuable if broken up and sold to other companies 25 - What are some questionable reasons for mergers?  Diversification  Purchase of assets ... rate would change the discount rate 25 - 26 Assume the target company has 20 million shares outstanding The stock last traded at $11 per share, which reflects the target’s value on...

Ngày tải lên: 06/04/2015, 19:41

... portfolio risk management 23 - 20 How are risk exposures identified and measured?  Large corporations have risk management personnel which have the responsibility to identify and measure risks facing ... substantially in the interim 23 - 19 Chapter 23 Extension: Insurance and Bond Portfolio Risk Management  Risk identification and measurement  Property loss, l...

Ngày tải lên: 06/04/2015, 19:41

... convertibles would be exercised Debt would remain outstanding 21 - 43 Recap the differences between warrants and convertibles  Warrants bring in new capital, while convertibles not  Most convertibles ... equity and 20% convertibles or bonds with warrants What effect will the two financing alternatives have on the firm’s WACC? 21 - 35 Convertibles Step 1: Find the after-t...

Ngày tải lên: 06/04/2015, 19:41

... 19 - What agencies regulate securities markets?  The Securities and Exchange Commission (SEC) regulates:  Interstate public offerings  National stock exchanges  Trading ... fund 19 - Differentiate between a private placement and a public offering  In a private placement, such as to angels or VCs, securities are sold to a few investors rather than to the public ... in final...

Ngày tải lên: 06/04/2015, 19:41

... investors 18 - 28 New Stock Plan  Firm issues new stock to DRIP enrollees, keeps money and uses it to buy assets  No fees are charged, plus sells stock at discount of 5% from market price, which is ... increases risk, and doesn’t appeal to any specific clientele  Conclusion: Consider residual policy when setting target payout, but don’t follow it rigidly 18 - 19 Stock Repurc...

Ngày tải lên: 06/04/2015, 19:41

... is reported on balance sheets 15 - Total Corporate Value  Total corporate value is sum of: Value of operations Value of nonoperating assets 15 - Claims on Corporate Value  Debtholders have ... share = $376.94 /10 = $37.69 15 - 25 Value-Based Management (VBM)  VBM is the systematic application of the corporate valuation model to all corporate decisions and strategic in...

Ngày tải lên: 06/04/2015, 19:41

... capital = 10% 11 - Incremental Cash Flow for a Project  Project’s incremental cash flow is: Corporate cash flow with the project Minus Corporate cash flow without the project 11 - Should you ... judgments 11 - 28 What three types of risk are relevant in capital budgeting?  Stand-alone risk  Corporate risk  Market (or beta) risk 11 - 29 How is each type of...

Ngày tải lên: 06/04/2015, 19:41

... rs = rRF + (RPM)bi could change  Inflation expectations  Risk aversion  Company risk  g could change 7 - 35 Stock value vs changes in rs and g D1 = $2, rs = 10%, and g = 5%: P0 = D1 / (rs-g) ... 0.06 0 .07 - 15 What is the stock’s market value one year from now, ^ 1? P  D1 will have been paid, so expected dividends are D2, D3, D4 and so on Thus, D2 P1 = rs - g = $2.2427 = $32.10...

Ngày tải lên: 06/04/2015, 19:41

... 5-2 Portfolio Theory  Suppose Asset A has an expected return of 10 percent and a standard deviation of 20 percent Asset B has an expected return of 16 percent and a standard deviation ... the correlation between A and B is 0.6, what are the expected return and standard deviation for a portfolio comprised of 30 percent Asset A and 70 percent Asset B? 5-3 Portfolio Ex...

Ngày tải lên: 06/04/2015, 19:41

... (Diversifiable) Risk 35 Stand-Alone Risk, σ p 20 Market Risk 10 20 30 40 2,000+ # Stocks in Portfolio - 27 Stand-alone Market Diversifiable = risk + risk risk Market risk is that part of a security’s stand-alone ... market risk, so prices and returns reflect this lower risk  The one-stock investor bears higher (stand-alone) risk, so the return is less than that required by t...

Ngày tải lên: 06/04/2015, 19:41