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Case Analysis
Summary:
Jonathan Wydown founded Ceres Gardening Company- a leading player in the growing
organic gardening industry, selling seeds, small plants, and related items, in 1989. In the
early 1990s Ceres had developed a modest retail
Financial Statements Analysis
& Financial Planning
(Chapters 2 &3)
FIN 605
Key Concepts and Skills
Understand
the information provided by financial statements
Grasp the difference between accounting income and cash flow
Calculate a firms financial cash fl
FIN 605
Homework 1
Hard copy due on Feb 3 before class.
Assignments will be graded on correctness as well as presentation. Due to the amount
of time given to complete the assignment, I expect high scores and will grade
accordingly. In addition, late assig
Making Capital Investment Decisions
(Chapter 8)
FIN 605
Key Concepts and Skills
p
p
p
p
Determine the relevant cash flows for various types of capital
investments
Compute depreciation expense for tax purposes
Incorporate inflation into capital budgeting
E
Stock Valuation
(Chapter 6)
FIN 605
Key Concepts and Skills
p
p
p
Comprehend that stock prices depend on future dividends and
dividend growth
Compute stock prices using the dividend growth model
Appreciate the PE ratio
Chapter Outline (selected sections)
Net Present Value
and Other Investment Rules
(Chapter 7)
FIN 605
Key Concepts
Compute and interpret an investments NPV and IRR
The advantages and disadvantages of each valuation
method specified above.
Ability to explain why NPV is the best decision crite
Capital Budgeting
FIN605
Overview
p
What is capital budgeting?
n A process of evaluating potential investment projects
p
Decision criteria
n
n
n
n
n
NPV
IRR
MIRR
Profitability Index
Payback, discounted payback
Asset Valuation: Discounted Cash Flow Approac
Chapter 3: Decision trees and real options
Sample Problems (end-of-chapter problems: 9-6, 23&24)
6.
We need to calculate the NPV of the two options, go directly to market now, or utilize test marketing
first. The NPV of going directly to market now is:
NP
Capital Budgeting
- Risk Analysis
FIN625
Introducing Uncertainty
p
Sensitivity Analysis
n
n
n
p
Using Data Table
Make small changes in different variables, one at a time,
and observe the effect on the NPV
Investigate impact in isolation
Scenario Analysis
Real Options
FIN 625
Real Options
p
p
p
Real options exist when managers can influence the size and
risk of a projects cash flows by taking different actions during
the projects life in response to changing market conditions.
Alert managers always look fo
Financial Statements Analysis
& Financial Planning
(Chapters 2 &3)
FIN 605
Key Concepts and Skills
p
p
p
p
Understand the information provided by financial statements
Grasp the difference between accounting income and cash
flow
Calculate a firms financial
Stock Valuation
(Chapter 6)
FIN 605
Key Concepts and Skills
omprehend that stock prices depend on future dividends and
dividend growth
ompute stock prices using the dividend growth model
ppreciate the PE ratio
Chapter Outline (selected sections)
6.1 The P
Making Capital Investment Decisions
(Chapter 8)
FIN 605
Key Concepts and Skills
etermine the relevant cash flows for various types of capital
investments
ompute depreciation expense for tax purposes
ncorporate inflation into capital budgeting
mploy the va
FIN625
Capital Budgeting (Excel Modeling)
From Sakai, download the Excel model that illustrates the details of cash flow analysis for the
following capital budgeting.
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