Question: How should a company decide which risks to hold and
How should a company decide which risks to hold and which to hedge?
Answer to relevant QuestionsHow much cash flow risk should a company take on? How should it manage risks with extreme outcomes that could potentially bankrupt the company but are very unlikely to occur? Apply the conservation of value principle to acquisitions. Why is the old way of decomposing TRS (into changes in earnings, changes in P/E, and dividend yield) not the best way to understand a company’s performance? For which type of company is additional growth likely to create more value: a high-ROIC company in a mature market or a low-ROIC company in a fast-growing market? Give reasons for your answer. Assuming the market value of debt equals today’s book value of debt, what is the intrinsic equity value for BrandCo? What is the intrinsic value per share? Does it differ from the share price used to determine the cost of ...
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