Kim Silverman, CFO of the First Public Bank Company, notes: “We are fortunate to have a cost of capital of only 7 percent. We want to leverage this advantage by acquiring other banks that have a higher cost of funds. I believe that we can add significant value to these banks by using our lower cost financing.” Do you agree with Silverman’s analysis? Why or why not?
Answer to relevant QuestionsJoe Smith argues that “learning how to do business analysis and valuation using financial statements is not very useful, unless you are interested in becoming a financial analyst.” Comment.What are the ways that a firm can create barriers to entry to deter competition in its business? What factors determine whether these barriers are likely to be enduring?The Boston Tea Company plans to acquire Hi Flavor Soda Co. for $60 per share, a 50 percent premium over current market price. John E. Grey, the CFO of Boston Tea, argues that this valuation can easily be justified, using a ...Under current U.S. accounting standards, acquirers are required to capitalize goodwill and report any subsequent declines in value as an impairment charge. What performance metrics would you use to judge whether goodwill is ...You are approached by the management of a small start-up company that is planning to go public. The founders are unsure about how aggressive they should be in their accounting decisions as they come to the market. John ...
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