Corporate finance

Finc. 395 Investments - Week 3. Chapter 6, Pg. 161 Flow of Funds Exercise a. No. Carson could not issue commercial paper seeing a large amount of debt it has. It may rely on debt to obtain additional funds. So before it would be able to issue any commercial paper, it would have to go public (issue stock). b. When using a line of credit, the cost of forgoing the return on these securities is lower than the cost incurred. So for this reason, I think Carson should consider selling its holdings…

a. If Sports Experts expands into Thailand, do you think its cost of capital will be greater or lower than its cost of capital when operating solely in the US? Explain your answer. Sports Experts’ cost of capital will probably be greater than the cost of capital of sport shoes manufacturers operating in the U.S. because of Sports Experts’ expansion into Thailand. Typically, an MNC has access to international capital markets, and international diversification are advantageous to an MNC’s cost…

From the table, it is obvious that Aristocrat Leisure Limited has increased its debt financing and equity financing. According to these increases, the equity financing is the preferred option to finance for Aristocrat Leisure Limited and the capital structure of Aristocrat is mainly from it. As a result, Aristocrat Leisure Limited does not get any tax benefits from increased debt financing. Over the four-year period, Aristocrat Leisure has increased…

The most popular and father of all models in asset pricing (CAPM) from Sharpe (1964) and Lintner (1965a) was developed independently of each other using the portfolio theory to deduce a market equilibrium. Portfolio theory with a riskless asset and unlimited short sales was the basis for this model (Krause, 2001). To add to the charateristics of accumulating portfolio theory to ascertain the market stability, it also considers the decision of a sole investor. Given the price Sharpe (1964) and…

QUESTION 2 2.1 Discuss the THREE key functions of money in an economy. Mohr P. and associates, (2015), indicates that money serves as an important part of our everyday life. Money is any good that is widely accepted in exchange of goods and services, as well as payment of debts. The 3 Key functions of money in an economy can be described as follows: 1. Medium of exchange can be defined as money that is used for buying and selling goods and services and if there was no money, goods would…

There are two variants of the DCF valuation: the equity valuation and the firm valuation. In fact, we can either use the free cash flow to the firm (FCFF), which is the after-tax cash flow that accrues from the firm's operations, net of investments in capital and net working capital, or we can use the free cash flow to equity (FCFE) that is the cash remaining after a firm meets all of its debt obligations and provides for necessary capital expenditure. Discounting the FCFF at the cost of capital…

Before agreeing to any project, that has medium or long term effects on the company, a financial analysis has to be done. It is necessary to find out the financial effects before spending any money on it. Investment appraisal techniques Every model has advantages and disadvantages, so it is advisable to use more than one for any given project. Net Present Value (NPV) The NPV model is the most common method analysing investment decisions. It measures capital growth, which is the fundamental…

management firm. The group has operations in four areas: corporate private equity, global marketing strategies, real assets and investment solutions with its specialisation being in Private equity. The group has over $193 billion of assets under management across 128 funds. The firm has investors from various strata of the society ranging from public and private pension funds to sovereign wealth funds, union and corporations. Carlyle’s corporate private equity segment was established in 1990 and…

1. Discuss the advantages and disadvantages of the corporate tax. (6 marks) Advantages i. Source of Revenue - Corporate taxes can be effectively utilized as a tool for the government to generate higher revenues as corporations are the largest money makers in the every economy. The government can therefore create a steady and strong flow of cash by targeting those making large profits. ii. Distribution – Taxing companies that are making profits helps redistribute the benefits to the society…

1. The importance of financial management. Finance is the essential and regarded as the life-blood requirement of every organization (public or private, profit oriented or even non-profitable organization). The efficient management is closely linked with the efficient management of its finances. Resources are always limited, particularly in developing countries, compared to its demands or needs. So, the focus, is concerned with optimum utilization of resources, to take maximum benefit, in the…