Critically discuss the problems associated with using the above valuation techniques.

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The managing directors of KADLexPLC are considering what value to place on Dragon PLC, a company that they are planning to take-oversoon.KADLex’s share price is currently £3.89 and the company’s earnings per share stand at 21p. KADLex’sweighted average cost of capital is 9%.The board estimates that annual after-tax synergy benefits resulting from the takeover will be £4.35m, that Dragon’sdistributable earnings will grow at an annual rate of 2.5%.That duplication will allow the sale of the £21m of assets, net of corporate tax (currently standing at 20%), in a year’s time. Information relating to Dragon PLC:Financial Statement of Dragon PLC£m£mNon-current assets270Current assets56Total assets326EquityOrdinary Shares (£1)147Reserves642117% bonds72Current liabilities43Total liabilities326

Statement of Profit or Loss extracts£mProfit before interest and tax64.0Interest payments6.5Profit before tax57.5Taxation17.1Distributable earnings40.4Other financial market information:Current ex-div share price£2.05Latest dividend payment13pPast four years dividends payment10p, 10.5p, 11p, 12pDragon’sequity beta1.1 %Treasury billsyield5%Return on the market11%Given the above information calculate the value of Dragon PLC using the following valuation methods:a)Price/earnings ratio(10 marks)

b)Discounted cash flow method(10 marks)

c)Dividend valuation method(10 marks)

d)Drawing on the mergers and takeovers literature, critically discuss the problems associated withusing the above valuation techniques.Basedon your opinion,which of the above valuationtechniqueswould you recommend with economic justifications to the board of KADLexPLC to use in this acquisition.(20 m

Critically evaluate the benefits and limitations of each of the differing investment appraisal techniques, ensuring the response is supported with relevant academic research.

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Investment Appraisal TechniquesHappy Meal Limited a food manufacturer is considering purchasing a new machine for £320,000. The company is expecting an annual cash inflow of £105,000 from the sale of products and an annual cash outflow of £15,500 for each of the six years of the machine’s useful life. The annual cash outflows do not include annual depreciation charges for the machine. The machine is depreciated using a15% reducing method. The machine is expected to last for sixyears, with a residual value estimated to be at the rate of 10% of the original cost of the machine. The cost of capital for Happy Meal Limited is 12%.You are required to:

(a) Calculate using the following investment appraisal techniques, and provide briefrecommendations as to the economic feasibility of acquiring the machine:

i.The Payback Period.

ii.The Accounting Rate of Return.

iii.The Net Present Value.iv.The Internal Rate of Return (to two decimal places)(20 marks)

(b) Critically evaluate the benefits and limitations of each of the differing investment appraisal techniques, ensuring the response is supported with relevant academic research. (30 marks)

Critically discuss the advantages of scrip dividends from the point of view of the company and theshareholders,ensuring the response draws upon relevant academicresearch within this highly topical area of financial management.

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Long term finance: Equity finance (a) Lexbel PLCgenerates earnings after tax (PAT) of 20 per cent on shareholders’ funds. Its currentcapital structure is as follows:£Ordinary shares of 25p each300,000Reserves 400,000700,000The board of Lexbel PLCwishes to raise £180,000 from a right issue to expand existing operations. Its return on shareholders’ funds will be unchanged. The current ex-dividend market price of Lexbel PLCis £1.90. Three different rights issue prices have been suggested by the finance director: £1.80, £1.60,and £1.40.

(a) Determine the:i.number of shares to be issued,ii.theoretical ex-rights price,iii. expected earnings per share andiv. form of the issue for each rights issue price, andv. Present your results in a tabular form and critically evaluate the best option among the three rightissues(20 marks)

(b) It has become common for companies to offer their shareholders a choice between a cash dividendand an equivalent scrip dividend. Critically discuss the advantages of scrip dividends from the point ofview of the companyand theshareholders,ensuring the response draws upon relevant academicresearch within this highly topical area of financial management. (30 marks)

Discuss the company’s profitability, liquidity and efficiency for the years ended February 2020 and 2019 restated.

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Prepare a report to the shareholders of Wm Morrison Supermarkets Plc to discuss the company’s profitability, liquidity and efficiency for the years ended February 2020 and 2019 restated. Your report should include an appendix containing any relevant ratios calculations that support your answer.

To what extent will fintech take over the financial industry?

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To what extent will fintech take over the financial industry?

How to deal with moral hazard in banking?

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The essay should contain 3 sections: i) Explaining the question posed(0,5 pages); ii) Summarizing most important literature (1 page), iii) Developing an answer: analytical, evidence-based (1,5 pages). The number of papers to use is 5. The papers must be from the leading (A) journals in the field, or in finance and economics in general, like Journal of Economic Perspectives, Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Banking and Finance, Journal of Financial Intermediation – just to mention the top Finance journals, or the top econ journals.

What are the amounts of net operating working capital for both years?

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Free Cash Flows

Rhodes Corporation’s financial statements are shown below.

Rhodes Corporation: Income Statements for Year Ending December 31
(Millions of Dollars)

  2020   2019
Sales $ 13,000   $ 11,000
Operating costs excluding depreciation 11,590   9,748
Depreciation and amortization 350   320
    Earnings before interest and taxes $ 1,060   $ 932
Less interest 220   200
    Pre-tax income $ 840   $ 732
Taxes (25%) 210   183
Net income available to common stockholders $ 630   $ 549
Common dividends $ 204   $ 200

Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)

  2020   2019
Assets
Cash $ 650   $ 600
Short-term investments 220   200
Accounts receivable 2,750   2,500
Inventories 1,450   1,400
    Total current assets $ 5,070   $ 4,700
Net plant and equipment 3,750   3,500
Total assets $ 8,820   $ 8,200
 
Liabilities and Equity
Accounts payable $ 1,300   $ 1,200
Accruals 650   600
Notes payable 184   100
    Total current liabilities $ 2,134   $ 1,900
Long-term debt 1,300   1,200
    Total liabilities $ 3,434   3,100
Common stock 3,960   4,100
Retained earnings 1,426   1,000
    Total common equity $ 5,386   $ 5,100
Total liabilities and equity $ 8,820   $ 8,200

Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions.

  1. What is the net operating profit after taxes (NOPAT) for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.

$   million

  1. What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.

2020: $   million

2019: $   million

  1. What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.

2020: $   million

2019: $   million

  1. What is the free cash flow for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Cash outflow, if any, should be indicated by a minus sign. Round your answer to the nearest whole number.

$    million

  1. What is the ROIC for 2020? Round your answer to two decimal places.

%

  1. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
After-tax interest payment $    million
Reduction (increase) in debt $    million
Payment of dividends $   million
Repurchase (Issue) stock $   million
Purchase (Sale) of short-term investments $   million

 

 

2, Statement of Retained Earnings

In its most recent financial statements, Del-Castillo Inc. reported $35 million of net income and $820 million of retained earnings. The previous retained earnings were $800 million. How much in dividends did the firm pay to shareholders during the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

$

 

 

3, Corporate Tax Liability

The Talley Corporation had taxable operating income of $345,000 (i.e., earnings from operating revenues minus all operating costs). Talley also had (1) interest charges of $70,000, (2) dividends received of $20,000, and (3) dividends paid of $35,000. Its federal tax rate was 21% (ignore any possible state corporate taxes). Recall that 50% of dividends received are tax exempt.

What is the firm’s taxable income? Round your answer to the nearest dollar.

$

What is the tax expense? Round your answers to the nearest dollar.

$

What is the after-tax income? Round your answers to the nearest dollar.

$

 

4,

Corporate Tax Liability

The Wendt Corporation reported $40 million of taxable income. Its federal tax rate was 21% (ignore any possible state corporate taxes).

  1. What is the company’s federal income tax bill for the year? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

$

  1. Assume the firm receives an additional $2 million of interest income from some bonds it owns. What is the additional tax on this interest income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

$

  1. Now assume that Wendt does not receive the interest income but does receive an additional $2 million as dividends on some stock it owns. Recall that 50% of dividends received are tax exempt. What is the additional tax on this dividend income? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

$

 

5,

Free Cash Flows

Rhodes Corporation’s financial statements are shown below.

Rhodes Corporation: Income Statements for Year Ending December 31
(Millions of Dollars)

  2020   2019
Sales $ 13,000   $ 11,000
Operating costs excluding depreciation 11,590   9,748
Depreciation and amortization 350   320
    Earnings before interest and taxes $ 1,060   $ 932
Less interest 220   200
    Pre-tax income $ 840   $ 732
Taxes (25%) 210   183
Net income available to common stockholders $ 630   $ 549
Common dividends $ 204   $ 200

Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)

  2020   2019
Assets
Cash $ 650   $ 600
Short-term investments 220   200
Accounts receivable 2,750   2,500
Inventories 1,450   1,400
    Total current assets $ 5,070   $ 4,700
Net plant and equipment 3,750   3,500
Total assets $ 8,820   $ 8,200
 
Liabilities and Equity
Accounts payable $ 1,300   $ 1,200
Accruals 650   600
Notes payable 184   100
    Total current liabilities $ 2,134   $ 1,900
Long-term debt 1,300   1,200
    Total liabilities $ 3,434   3,100
Common stock 3,960   4,100
Retained earnings 1,426   1,000
    Total common equity $ 5,386   $ 5,100
Total liabilities and equity $ 8,820   $ 8,200

Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions.

  1. What is the net operating profit after taxes (NOPAT) for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answer to the nearest whole number.

$   million

  1. What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.

2020: $   million

2019: $   million

  1. What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.

2020: $   million

2019: $   million

  1. What is the free cash flow for 2020? Enter your answer in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Cash outflow, if any, should be indicated by a minus sign. Round your answer to the nearest whole number.

$    million

  1. What is the ROIC for 2020? Round your answer to two decimal places.

%

  1. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number.
After-tax interest payment $    million
Reduction (increase) in debt $    million
Payment of dividends $   million
Repurchase (Issue) stock $   million
Purchase (Sale) of short-term investments $   million

 

 

Explain the Impact of Stakeholder Preferences on Corporate Social Responsibility and Firm Performance

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Explain the Impact of Stakeholder Preferences on Corporate Social Responsibility and Firm Performance

Use the last annual report (2019) and the third quarter of 2020 in hand to obtain the figures needed in order to make a company valuation for FCA and PSA.

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Fiat Chrysler and PSA gained EU antitrust approval at the end of December for their USD $38bn merger. Some days ago, the merger of FCA and Groupe PSA was also approved by the shareholders. FCA and Groupe PSA expect to complete the combination on January 16, 2021. Together the new company STELLANTIS will be the fourth largest car producer in the world.
Tasks:
Read over the documents in the folder and answer the following questions.
1) Take a look at the last Annual reports of FCA and PSA (both 2019) and calculate the WACC for both companies separately. Compare your results from both companies with each other and interpret your results for 2019 and the third quarter of 2020.

If you cannot find all the information needed to calculate the WACC or the FCF in the annual reports, use recognized sources in addition to that. Please cite your sources and use screenshots to document your source of data.

2) Use the last annual report (2019) and the third quarter of 2020 in hand to obtain the figures needed in order to make a company valuation for FCA and PSA. Use Multiples/Comparables to value FCA and PSA. And interpret your results.

You may use the “vebidta Europe” Excel File from our Moodle Page and all other relevant documents you may need. If you cannot find all relevant information in the materials use recognized sources. Please cite your sources and use screenshots to document your source of data.

3) Were both companies affected by the Covid Crises? Use market capitalization of each company as an indicator and compare the different prices at the end of 2019 (31.12.2019) – in the middle of March (18.3.2020) and end of 2020 (31.12.2020) and interpret your results. Compare the performance of FCA and PSA to other car producers worldwide. Who has performed better, and what do you think are possible reasons for that, please be specific.

ISIN:NL0010877643 – Fiat Chrysler Automobilies ISIN: FR0000121501 – Peugeot S.A.

4) Fiat Chrysler shareholders collectively will receive a pre-merger dividend of $3.56 billion (2.9 billion euros). Initially, the deal called for a $6.75 billion (5.5 billion euro) dividend, but the Agnelli family agreed to cut that by $3.3 billion (2.6 billion euros) to give the combined company more cash for operations.
Is that a fair deal and does that make sense to you? Please bolster your answer with your findings to Q1, Q2, and Q3 and additional financial calculations if necessary.

 Analyse the management accounting techniques related to a range of business situations and managerial decision making.

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Analyse the management accounting techniques related to a range of business situations and managerial decision making.
Prepare a budget to reflect a given business scenario.
Demonstrate the ability to assess the financial and non-financial aspects of divisional and organisational performance.