Finance For Executives Managing For Value Creation 6th Edition Gabriel Hawawini, Claude Viallet - Solutions

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Discuss the types of adjustments to reported financial statement numbers needed when calculating RI, and why such adjustments are needed.
Discuss how RI is applied to equity valuation.
Explain the advantages of RI valuation over traditional approaches such as the DDM.
Explain the disadvantages of RI valuation compared with traditional approaches such as the DDM.
Discuss some limitations of DCF valuation methods and the comparable firm valuation method in private company valuation.
Discuss the justifications for using high target rates of returns (discount rates) in the VC valuation method.
Discuss the accuracy of calculating the post-money valuation in the VC method as an estimate of the implied enterprise value of a private company.
Identify the role of capital structure in private company valuation.
Explain how technical analysis and fundamental analysis differ.
Describe how to assess a stock’s intrinsic value.
Identify some key characteristics of growth stocks.
Discuss the basics of income investing using equities.
Describe the trend in ESG investing.
Define the term factor.
Identify and discuss the four most prominent factors in academic literature.
Identify and discuss two distinct arguments for why factor performance is robust over time.
Discuss why combining multiple factors into a portfolio can be beneficial to investors.
Discuss how and why an investor could use factors to benchmark fundamental active managers.
Distinguish between factor investing and smart beta.
Differentiate between smart beta and alpha-seeking strategies.
Explain the performance of smart beta strategies between 1967 and 2010 and between 2009 and 2018.
Discuss whether the various investment strategies experience similar levels of volatility between 2009 and 2018.
Discuss the effectiveness of activist investing and identify its limitations.
Describe the different hedge fund activist approaches.
Describe the key differences between individual and institutional activists.
Compare and contrast the differences among SRI, ESG, and impact investing approaches and the asset classes that they are more likely to be found.
Discuss the challenges in measuring impact, ESG, and the tools that are currently being used.
Discuss why the lack of standardized guidelines regarding voluntary nonfinancial disclosure (ESG metrics) is such a critical problem for integrating ESG metrics into equity valuation.
Discuss the findings from academic research about the traditional SRI practice of negative screening.
To account for Apple’s supply chain problems, discusswhether an analyst should consider adjusting the company’s cost of capital upward to reflect the negative events associated with the global supplier.
Discuss how investors should consider the new types of risk that may affect brand value from negative events such as what Apple experienced with its supplier.
Discuss the tax efficiency of ETFs relative to MFs.
Discuss the relative transparency of ETFs into the underlying assets and benefits to investors.
Discuss three benefits of ETFs.
Contrast the share creation processes of MFs and ETFs.
Describe the important differences between MFs and CEFs.
Define PE and list its different types.
Define commitment period, capital call, seed money, and bridge financing.
Discuss the different types of risks involved with PE investments.
List the main factors that PE investors should consider before investing.
Discuss an investor’s motivation to invest in VC versus a buyout and an issuer’s motivation for PE financing over other sources of financing.
Define different measures of PE returns and discuss why they differ from conventional public market metrics.
Identify the factors affecting the capital flow to emerging markets.
Discuss how global investors can still benefit from investing in emerging markets given that these markets are becoming more integrated with developed markets.
Discuss some effective institutional strategies for making better investments in emerging markets.
Discuss whether political connections matter in investment decisions and performance in emerging markets.
Discuss the pros and cons of various disclosure regulation approaches: voluntary, mandatory, and comply or explain options.
Elaborate on the challenges associated with environmental disclosure regulation in China.
Discuss the information mosaic argument in the context of private meetings.
Explain how insiders can make profits around private meetings in China.
Describe the slow growth of equity crowdfunding in the United States.
Identify four types of crowdfunding.
List two opportunities, relative to traditional sources of funding, for entrepreneurs and/or investors to participate in the equity crowdfunding market.
Identify two challenges faced by entrepreneurs and/or investors who participate in the equity crowdfunding market.
Consider a two-year, 5 percent coupon bond selling at par. Answer the following questions.a. What is the bond’s yield to maturity? What assumption does the yield make regarding the first coupon payment? b. Assume that in a year the one-year market rate is 7 percent (this future rate is
You borrowed $80,000 to finance the purchase of a property through a standard, 30-year fixed rate mortgage with an annual interest rate of 8 percent, compounded monthly.a. What is your monthly mortgage payment?b. How much interest and how much principal repayment are in your first monthly mortgage
What is the interest rate that makes you indifferent between $1,000 in one year and $1,180 in three years?
a. What would be the compounded value of one dollar in three years if the annual interest rate is 3 percent in Year 1 and is expected to rise to 5 percent in Year 2 and 6 percent in Year 3?b. What constant annual interest rate would produce the same compounded value over three years?
You can purchase a car with one of the following two financing plans. You make a down payment of $12,000 and 36 monthly payments of $400 starting immediately. Alternatively, you can make 60 monthly payments of $492 starting next month without any down payment. Which plan offers a better deal if the
A company borrowed $10 million for five years from Atlantic Bank. The company pays Atlantic Bank a fixed annual rate of 8 percent and must pay back the $10 million loan at the end of the borrowing period. A year has passed since the loan was made and Atlantic Bank wants to sell the loan to Pacific
The municipal government has imposed a temporary, five-year tax increase on the value of property that will raise $80 million at the end of the first year. Property values are estimated to grow at a rate of 3 percent per year.a. What is the present value of the total amount of tax the proposal will
Below are the recent performances of four investment funds, a market index (M), and a risk-free asset (F): a. Fill in the empty cells in the table above.b. What are the alphas of the above portfolios? How did the investment funds perform? Investment Fund Average return Average
You want to test the speed with which stock market prices adjust to positive earnings’ announcements. Company A makes its earnings announcement on May 20 and Company B on June 16. You collected for each company daily share price returns two days before the event day and two days after the event
A junior employee, who just turned 25, decides to set up a personal retirement fund to supplement her government-funded pension plan during her first 20 years of retirement. She wants to have an annual income of $50,000 starting when she turns 65 and ending on her 84th birthday.a. What lump sum
You invest one-third of your wealth in each of three stocks. The expected return and standard deviation of each individual stock is 10 percent and 20 percent, respectively. Each stock has a pairwise correlation of 0.50 with the returns of the two other stocks.a. What is the expected return of the
Below are incomplete balance sheets of OQ Corporation (figures in millions). a. Compute the missing amounts, and show the balance sheet at year-ends 1, 2, 3, and 4. Show your computations. b. Comment on the asset and liability structure of the firm. End-of-year for balance sheet
The market portfolio has an expected return of 9 percent with a 10 percent volatility. The risk-free rate is 4 percent. A stock has a 20 percent volatility and a correlation coefficient of minus 0.10 with the market.a. What is the stock’s beta? What does its sign indicate?b. What is the stock’s
Below is some income statement information on company ABD. Prepare an income statement for each of the three years. Show your computations. Sales Interest expense Cost of goods sold Administrative and selling expenses Income tax expense Earnings after tax Year
Prepare the managerial balance sheet of the following US company balance sheet (the company applies US GAAP): In millions Assets Current assets: Cash and cash equivalents Short-term investments Merchandise inventories Deferred income taxes Other current assets Total current assets Property,
The General Distribution Company (GDC) is a privately-held company in the wholesale food distribution sector. You collected data on a sample of five listed companies in the same sector which are similar to GDC. Get five estimates of GDC’s equity value based on the following data:
It is often the case that suppliers offer their customers to either pay the full amount of the invoice within a certain number of days, for example within 30 days, or receive a discount if they pay earlier, for example within 15 days. The first option would usually be referred to as ‘Net 30’.
Following the bankruptcy of Lehmann Brothers on September 15, 2008, the shortterm credit market came to a halt. Many companies found themselves unable to renew their short-term debt and fell into financial distress. If, at that time, your company held a lot of cash, would you have felt immune to
Consider a 6 percent coupon bond with a $1,000 face value maturing tomorrow.a. What would be the price at which the bond is quoted?b. According to bond conventions, what is the bond’s flat price?c. What is the accrued interest if the bond pays a coupon semi-annually?d. What is the bond’s
A three-year, 4 percent government bond is trading at $1,001. The spot yield curve indicates that the 1-year spot rate is 2 percent, the 2-year spot rate is 3 percent, and the 3-year spot rate is 4 percent. Is there an arbitrage opportunity, that is, is it possible to earn a riskless profit by
The International Supplies Company (ISC) has convertible preferred stocks trading at $80 and serving an annual dividend of $2.40. The preferred is convertible into two shares of ISC common stocks. Shares of common stocks are currently trading at $32.a. What is the conversion ratio of the
The Rolleston Company (TRC), an all-equity financed company, generates perpetual free cash flow of $40 million. It holds $100 million of cash, has 50 million shares outstanding, and its shareholders require a 10 percent return on their investment in the firm. TRC management wants to invest the $100
Return to the WTM case in the chapter where it is said that WTM could hedge its exposure to the price risk of copper by purchasing a call option for $336 that would give it the right to buy one ton of copper in three months for $6,000. The spot price of a ton of copper is $6,000 and the risk-free
The Pacific Food Company (PFC) has created a new concept restaurant that serves low-calorie healthy pizza at competitive prices. The restaurant costs $1.2 million to launch and is expected to generate a free-cash-flow stream with a present value of $1 million and a volatility of 30 percent.

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Finance For Executives Managing For Value Creation 6th Edition Gabriel Hawawini, Claude Viallet - Solutions

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