Lecture_13_student - Lecture 13: Corporate Valuation: II BD...

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Lecture 13: Corporate Valuation: II BD Chapter 11
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Topics Value-Based Management Corporate Governance
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Does high growth always increase firm value? Bell Electronics: Financial results of 2009 Each division has WACC of 10.5%, tax rate 40%. Each division is projected to grow by 5% from 2010.
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What are values of operations? Bell's Memory Division 2009 2010 Panel A: Partial Income  Statement     Net Sales 1000. 0 1050.0 Cost (except depreciation) 810.0 850.5 Depreciation 59.0 62.0 EBIT 131.0 137.6       Panel B: Partial Balance Sheet     Cash 10.0 10.5 Accounts receivable 80.0 84.0 Inventories 300.0 315.0 Net Plant and Equipment 590.0 619.5       Accounts Payable 50.0 52.5 Accruals 60.0 63.0 Bell's Instruments Division 2009 2010 Panel A: Partial Income  Statement     Net Sales 500.0 525.0 Cost (except depreciation) 425.0 446.3 Depreciation 15.0 15.8 EBIT 60.0 63.0       Panel B: Partial Balance Sheet     Cash 50.0 52.5 Accounts receivable 25.0 26.3 Inventories 75.0 78.8 Net Plant and Equipment 105.0 110.3       Accounts Payable 25.0 26.3 Accruals 30.0 31.5
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Market Value Added (MVA) MVA=V OP – Book Value of Operating Assets MVA=Market Value of Assets – Book Value of Assets Divisional MVAs MVA of Memory Division = 709.6 – 870 = -160.4 MVA of Instruments Division = 505.5 – 200 = 305.5 Bell’s managers are surprised
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This note was uploaded on 06/06/2011 for the course FINA 4200 taught by Professor Wu during the Spring '08 term at University of Georgia Athens.

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Lecture_13_student - Lecture 13: Corporate Valuation: II BD...

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