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408 - 16:07 408 broker: P/Eration IPO:initialpublicoffer...

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16:07 408 01/12/11 broker: brings buyers and sellers together P/E ration A public firm has stock traded on the stock exchange market IPO: initial public offer Any asset has value because it’s a claim to future cash flow Price =sum of  future cash flow/(1+r)             r: discount rate Ben& Jerry’s $20 per share Issue: -how to respond to the take-over offers?             -Can B&J survive with its current orientation? Alternatives: -Yes. -No. Continue as is.  -Go Private
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Criteria: -represent the interest of society, management, shareholders?   Board of directors have legal responsibility to act in the best interest of the  shareholders.  Fiduciary responsibility: not just moral, but also legal responsibility Consider impact upon shareholders Identify underperformed firms, improve the performance, sell high Analysis: -poor financial performance -low stock price causing take-over offer Mission statement: Product: A Economic: C         shareholder’s wealth Social: A Consistent: people of Vermont                       Earl’s pig farm                       Rainforest                        Free cone day Conflict: 7.5% to charity                  Raise the price to stay in business Price of B&J= Price/Earnings  (Eskimo Pie ) * Earnings  (B&J)                      =30.7* 1.06= $32.5 Decision: 
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1/19 notes 16:07 Balance Sheet
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1/19 notes 16:07 Assets = Liabilities +Equities Equity: what’s left over, residue At one point of time Income statement Measures revenues and expenses over a period of time  REV -COGS =Gross Profit -OP EX =EBIT -INT EXP & TAX =Net Income Net income to pay dividends, or use as retained earnings Financial Ratio Look at the trends over time, other companies or industry as a whole Liquidity     : whether a firm can meet short term obligations    
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