principles of entrepreneurial finance

... market offer a return of 7%, then Cost of capital = r = 7% 16 Valuing an Office Building Step 3: Discount future cash flows PV = C1 (1+r) = 400 (1+.07) = 374 Step 4: Go ahead if PV of payoff exceeds ... higher rate of return w Higher required rates of return cause lower PVs PV of C1 = $400 at 7% 400 PV = = 374 + 07 19 Risk and Present Value PV of C1 = $400 at 12% 400 PV = = 357 + 12 PV of C1 = $400 ... of C1 = $400 at 7% 400 PV = = 374 + 07 20 Rate of Return Rule w Accept investments that offer rates of return in excess of their opportunity cost of capital Example In the project listed below,...

Ngày tải lên: 13/12/2013, 14:53

... market offer a return of 7%, then Cost of capital = r = 7% 16 Valuing an Office Building Step 3: Discount future cash flows PV = C1 (1+r) = 400 (1+.07) = 374 Step 4: Go ahead if PV of payoff exceeds ... higher rate of return w Higher required rates of return cause lower PVs PV of C1 = $400 at 7% 400 PV = = 374 + 07 19 Risk and Present Value PV of C1 = $400 at 12% 400 PV = = 357 + 12 PV of C1 = $400 ... of C1 = $400 at 7% 400 PV = = 374 + 07 20 Rate of Return Rule w Accept investments that offer rates of return in excess of their opportunity cost of capital Example In the project listed below,...

Ngày tải lên: 17/01/2014, 02:20

... market offer a return of 7%, then Cost of capital = r = 7% 16 Valuing an Office Building Step 3: Discount future cash flows PV = C1 (1+r) = 400 (1+.07) = 374 Step 4: Go ahead if PV of payoff exceeds ... higher rate of return w Higher required rates of return cause lower PVs PV of C1 = $400 at 7% 400 PV = = 374 + 07 19 Risk and Present Value PV of C1 = $400 at 12% 400 PV = = 357 + 12 PV of C1 = $400 ... of C1 = $400 at 7% 400 PV = = 374 + 07 20 Rate of Return Rule w Accept investments that offer rates of return in excess of their opportunity cost of capital Example In the project listed below,...

Ngày tải lên: 28/06/2014, 10:20

... they were also marrying The Principles of Corporate Finance Richard A Brealey Stewart C Myers Brealey−Meyers: Principles of Corporate Finance, Seventh Edition I Value Finance and the Financial ... Benrud University of Baltimore Peter Berman University of New Haven Jean Canil University of Adelaide Robert Everett Johns Hopkins University Brealey−Meyers: Principles of Corporate Finance, Seventh ... to fit the needs of the new Finance Tutor Series are included on the CD: your course Time Value of Money Tutor, Stock and Bond Valuation Brealey−Meyers: Principles of Corporate Finance, Seventh...

Ngày tải lên: 06/07/2014, 08:20

... because its rate of return exceeds the cost of capital The rate of return on the investment in the office building is simply the profit as a proportion of the initial outlay: Return ϭ profit investment ... values • Rate -of- return rule Accept investments that offer rates of return in excess of their opportunity costs of capital.5 The Opportunity Cost of Capital The opportunity cost of capital is ... pessimistic Forecasts of expected payoffs are correct on average 15 Brealey−Meyers: Principles of Corporate Finance, Seventh Edition 16 PART I I Value Present Value and the Opportunity Cost of Capital ©...

Ngày tải lên: 06/07/2014, 08:20

... rate of r will, therefore, grow to er ϭ (2.718)r by the end of the first year By the end of t years it will grow to ert ϭ (2.718)rt Appendix Table at the end of the book is a table of values of ... 1.0772 ϭ $1.16 by the end of two years The present value of your year-2 cash flow equals PV ϭ C2 100 ϭ ϭ $86.21 11 ϩ r2 11.0772 33 Brealey−Meyers: Principles of Corporate Finance, Seventh Edition ... rate of return However, with an inflation rate of percent you are only 3.774 percent better off at the end of the year than at the start: Invest Current Dollars 1,000 Expected Real Value of Period-1...

Ngày tải lên: 06/07/2014, 08:20

... value of the stream of pershare dividends Brealey−Meyers: Principles of Corporate Finance, Seventh Edition I Value © The McGraw−Hill Companies, 2003 The Value of Common Stocks CHAPTER The Value of ... value of the investment as of t ϭ is NPV1 ϭ Ϫ 3.33 ϩ 83 ϭ $2.22 15 Brealey−Meyers: Principles of Corporate Finance, Seventh Edition I Value © The McGraw−Hill Companies, 2003 The Value of Common ... and profitability in Chapter 12 Brealey−Meyers: Principles of Corporate Finance, Seventh Edition I Value The Value of Common Stocks CHAPTER © The McGraw−Hill Companies, 2003 The Value of Common...

Ngày tải lên: 06/07/2014, 08:20

... dangers here The book rate of return may not be a good measure of true profitability It is also an average across all of the firm’s activities The average profitability of past investments is not ... expressed in terms of rate of return, which would lead to the following rule: “Accept investment opportunities offering rates of return in excess of their opportunity costs of capital.” That statement, ... defining the true rate of return of an investment that generates a single payoff after one period: Rate of return ϭ payoff investment Ϫ1 Alternatively, we could write down the NPV of the investment...

Ngày tải lên: 06/07/2014, 08:20

... value of a series of harvests, taking account of the different growth rates of young and old trees Repeat our calculations, counting the future market value of cut-over land as part of the payoff ... countries The French tax rate is made up of a basic corporate tax rate of 33.3 percent plus a surtax of 3.33 percent Brealey−Meyers: Principles of Corporate Finance, Seventh Edition I Value Making ... a life of five years, and at a discount rate of percent the present value of the cost of buying and operating it is $500,000 We begin by converting the $500,000 present value of cost of the new...

Ngày tải lên: 06/07/2014, 08:20

... companies account for over 70 percent of the value of stocks traded.) A portfolio of the common stocks of small firms These investments offer different degrees of risk Treasury bills are about as ... run off the top of the page Brealey−Meyers: Principles of Corporate Finance, Seventh Edition II Risk © The McGraw−Hill Companies, 2003 Introduction to Risk, Return, and the Opportunity Cost of ... compound rate of growth on stocks and the interest rate As we explained above, this is not an appropriate measure of the cost of capital 157 Brealey−Meyers: Principles of Corporate Finance, Seventh...

Ngày tải lên: 06/07/2014, 08:20

... shares of Coca-Cola or Reebok You decide that Reebok offers an expected return of 20 percent and CocaCola offers an expected return of 10 percent After looking back at the past variability of the ... about the risk of such a portfolio? We know that thanks to diversification the portfolio risk is less than the average of the risks of the Brealey−Meyers: Principles of Corporate Finance, Seventh ... Prices: A Theory of Market Equilibrium under Conditions of Risk,” Journal of Finance 19 (September 1964), pp 425–442 and J Lintner, “The Valuation of Risk Assets and the Selection of Risky Investments...

Ngày tải lên: 06/07/2014, 08:20

... and costs of (equity) capital for a sample of large railroad companies and for a portfolio of these companies The precision of the portfolio beta is much better than that of the betas of the individual ... problem of Union Pacific’s cost of capital, but first we need to look at the relationship between the cost of capital and the mix of debt and equity used to finance the company Think again of what ... view the project as offering an expected payoff of 5(1,500)ϩ.5(0) ϭ 750, or $750,000, at t ϭ on a $125,000 investment at t ϭ Of course, the certainty equivalent of the payoff is less than $750,000,...

Ngày tải lên: 06/07/2014, 08:20

... the cost of capital was percent in nominal terms 283 Visit us at www.mhhe.com/bm7e Brealey−Meyers: Principles of Corporate Finance, Seventh Edition Brealey−Meyers: Principles of Corporate Finance, ... again show the profitability of the project for each combination of aircraft and demand level You can interpret each of these figures as the present value at the end of year of the cash flows ... for Lockheed’s TriStar: An Application of Financial Theory,” Journal of Finance 28 (September 1973), pp 821–838 Brealey−Meyers: Principles of Corporate Finance, Seventh Edition 262 PART III III...

Ngày tải lên: 06/07/2014, 08:20

... tons of copper next year What is the PV of this output? Assume that the sale occurs at the end of the year b If copper has a beta of 1.2, what is the expected price of copper at the end of the ... present value of the new plant and the change in the present value of the existing plant The total NPV of Marvin’s expansion plan is Total NPV ϭ NPV of new plant ϩ change in PV of existing plant ... The Value of Marvin Stock Let us think about the effect of Marvin’s announcement on the value of its common stock Marvin has 24 million units of second-generation capacity In the absence of any...

Ngày tải lên: 06/07/2014, 08:20

... ϩ.06 ϩ.093 ϩ.126† Rate of return, percent 12 11 10 Economic rate of return Book rate of return 10 15 20 25 Rate of growth, percent Brealey−Meyers: Principles of Corporate Finance, Seventh Edition ... they also often lose their jobs For example, a study of the remuneration of the chief executives of large U.S firms found that the heads of firms that were in the top 10 percent in terms of stock ... investment (ROI) of 130/1,000 ϭ 13 or 14 In practice, investment would be measured as the average of beginning- and end -of- year assets See Chapter 29 321 Brealey−Meyers: Principles of Corporate Finance, ...

Ngày tải lên: 06/07/2014, 08:20

... Intraday Speed of Adjustment of Stock Prices to Earnings and Dividend Announcements,” Journal of Financial Economics 13 (June 1984), pp 223–252 353 Brealey−Meyers: Principles of Corporate Finance, ... profit opportunities that such irrationality offers The evidence on the performance of professionally managed portfolios suggests that many of these anomalies were not so easy to predict Professional ... the ability of the market to absorb blocks of stock The average effect of the offerings was a slight reduction in the stock price, but the decline was almost independent of the amount offered Scholes’s...

Ngày tải lên: 06/07/2014, 08:20

... Brealey−Meyers: Principles of Corporate Finance, Seventh Edition 14 An Overview of Corporate Financing © The McGraw−Hill Companies, 2003 Brealey−Meyers: Principles of Corporate Finance, Seventh ... Efficiency FIGURE 14.2 Rest of world Holdings of corporate equities, 2000 Source: Board of Governors of the Federal Reserve System, Division of Research and Statistics, Flow of Funds Accounts Table ... World,” Journal of Finance 54 (1999), pp 471–517 385 Brealey−Meyers: Principles of Corporate Finance, Seventh Edition 386 IV Financial Decisions and Market Efficiency 14 An Overview of Corporate...

Ngày tải lên: 06/07/2014, 08:20

... Executive Officer since that date He is a past president of the Institute of 423 Visit us at www.mhhe.com/bm7e Brealey−Meyers: Principles of Corporate Finance, Seventh Edition Brealey−Meyers: Principles ... Delaware in 2013 Use of Proceeds The net proceeds of this offering are expected to be $36,744,445 Of the net proceeds, approximately $27.0 million will be used to finance expansion of the Company’s ... vs Auctions,” working paper, Department of Finance and Business Economics, University of Notre Dame, March 2001 Brealey−Meyers: Principles of Corporate Finance, Seventh Edition IV Financial Decisions...

Ngày tải lên: 06/07/2014, 08:20