Explain essential hypotheses for Economic Value Added
Which are the essential hypotheses so that valuations of the Economic Value Added (EVA) give similar results to discounting cash flows?
Expert
A Fernández (2002 and 2004) demonstrate that discounting expected EVAs gives the same value as discounting cash flows (so long as, from an accounting viewpoint, the increase in value of the Shareholders’ Equity equivalents the net income minus dividends). When E is the value of the shares and Evc is their book value, in that case:
E0 = Evc0 + VA (EVA; WACC), here EVAt = NOPATt – (Dt-1 + Evct-1) WACC
The Net Operating Profit after Taxes (NOPAT) is the profit of the unleveraged company as the profit before interests and after taxes. The Economic Value Added depends mainly upon two accounting parameters: its profit and the book value of debt and equity.
Explain the Monte Carlo evaluation of integrals.
What is Net Operating Profit after Tax (NOPAT)?
Is the Free Cash Flow (FCF) the sum of the debt cash flow and the equity cash flow?
AB Restaurants has debt/equity ratio .25, and its leveraged beta is 1.5. Its tax rate is 30%, and its cost of equity is 15%. The risk-free rate is 5%. CD Restaurants has debt/equity ratio .4, and tax rate 35%. Find the cost of equity for CD.
My investment bank told me that beta given by Bloomberg incorporates the illiquidity risk and small cap premium since Bloomberg does well-known Bloomberg adjustment formula. Is it true?
AB Corporation has 16% cost of equity, 35% tax rate, and debt-to-equity ratio of 30%. XY Corporation has 30% tax rate and debt-to-equity ratio of 40%. Both AB and XY are in the same business of selling automotive parts. If the riskless rate is 4% and the expected retu
provide three examples of mutually exclusive projects?
. A&B Enterprises is trying to select the best investment from among four alternatives. Each alternative involves an initial outlay of $100,000. Their cash flows follow: Year A B C D 1 $10,000 $50,000 $25,000 $ 0 2 20,000 40,000 25,000 0 3 30,000 30,000 25,000 45,0
Does this make any sense to form a portfolio comprised of companies along with a higher return/dividend?
Does it make any sense to compute betas against local indexes while a company has a great part of its operations outside such local market? I have two illustrations: BBVA and Santander.
18,76,764
1957255 Asked
3,689
Active Tutors
1453380
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!