FIN 2330 Study Guide - Final Guide: Compound Annual Growth Rate, Takeover, Profit Margin
Document Summary
Cost of capital: wacc = rd(1-t)wd + rsws + rpswps, cost of debt use the ytm, cost of equity rs = rf + b(rm-rf) or d1/p0+g. Growth rate: g = roic x reinvestment rate: roic = ebit(1-t)/op capital, rr = owc+net capex/ebit(1-t, cagr = (end/begin)1/n-1. Value per share pvfcfe = pvfcff + pvnoa + pvd + pvnol. Control right to direct the strategy/policies of a firm, allocate resources, distribute economic wealth; upside potential. Changes after hostile takeover: financial structure increase in leverage, no change in amount of capital investment, significant divestitures. Value of control = value of optimally managed firm value of status quo firm. If financial wacc(a+b) < weighted avg. of individual wacc. If business profit margin(a+b), g(a+b), sales(a+b) will be > than individual. Initial offer price: minimum = target status quo vps, maximum = minimum + synergy. Private to private: neither buyer or seller is diversified.
