Many financial analysts estimate the value of operating leases by discounting rental payments provided in the annual report at the cost of debt. Is this method likely to overestimate or underestimate the value of leased assets? Why?
Answer to relevant QuestionsMany companies securitize their accounts receivable. Name two ways the cost for securitizing receivables is recognized. If you decide to capitalize securitized receivables, when is an expense adjustment required? Use the R&D capitalization table developed in Question 2 to modify NOPLAT and invested capital from Question 1. What is the ROIC on yearend capital by year? How does this compare to the ROIC computed in Question 1? Assume that inflation unexpectedly increases by 10 percent. Explain why a company’s ROIC then needs to increase by more than 10 percent to preserve its shareholder value. Discuss the differences between the current, temporal, and inflationadjusted current methods for translating the financial statements of acquisitions or divisions located in moderately inflationary and hyperinflationary ...Discuss the relative merits of including risk adjustments in cash flow or in discount rates—especially for high-growth companies in emerging markets—and show how both approaches can be aligned.
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