11/22/2015
AssignmentPrintView
Score:
20/20
Points
100
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%
1/18
11/22/2015
1.
AssignmentPrintView
Award: 2 out of 2.00 points
First City Bank pays 7 percent simple interest on its savings account balances, wh
SECTION I Questions 1-5 are worth 2 marks each
Answer TRUE (T) or FALSE (F) by circling the appropriate letter
1)
A company spends approximately $3 million annually to hire auditors to go over
the firms
T
F
financial statements. This is an example of an i
Lecture 3 Accounting Treatmentsof M&A Activities
3.1) Background
Accounting is very important in M&A as:
0 one needs to see “behind” the numbers in a M&A transaction
0 combining ﬁrms always results in substantial different financial statements
(see also L
Lecture 2 The Legal and Regulatogy Framework
Corporate Governance & Performance
2.1) Why Regulators?
M&A (takeovers) are carried out in securities markets and they can cause wide price ﬂuctuations
with such activities. These can be very harmful to certain
Lecture 1 Introduction
1.1) Study of Finance
1.1.1
1.1.2
There are 2 main branches in the study of ﬁnance:
0 Corporate Finance
0 Investments
Corporate Finance
It deals with how companies (in this case we assume that it is a large public company
with share
Lecture 4 Deal Structure and Tax Impact
4.1) lntroductioa
If one ﬁrm buys another ﬁrm, the transaction may be taxable or tax free, depending on
the deal structure. In a taxable structure the shareholders of the target ﬁrm are considered
to have sold their
12/7/2015
AssignmentPrintView
Score:
11.56/12
Points
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96.33
%
1/7
12/7/2015
1.
AssignmentPrintView
Award: 3.56 out of 4.00 points
Use the option quote information shown here to answer the questions that foll
Lecture 5 Why Buy up other Companies or their Assets ?
5.1) IntroductiOn
As discussed in Lecture 1, a public company’s mission is to enhance the share price
for its shareholders. A sure way of doing this is to generate a positive cash flow on a
continuous
Lecture 6 Valuation of Potential Target Financial Performance
6.1) Why do some M&A Projects erode Shareholder Value ?
Often, bidders tend to overestimate targets’ values. People are subjected to cognitive errors
and emotional biases. An analyst might be o
Lecture 7 Detailed Analysis of M&A Proiects when “Target”
Is a Public Company
7.1) Introduction
As discussed in Lecture 6, the ﬁrst step to determine whether a company is a potential
target is to go through a very thorough “ financial review “ to look at
Lecture cl History of Merger Activig & Statistical
Observation of M&A Performance
9.1) Background
After going through all the theories and causes on M&As in the previous lectures, this lecture
attempts to see if all the empirical studies done on M&A activ
Lecture 8 Valuation of Private Companies for M&A Activities
8.1) Introduction
In Lecture 7, we have looked into valuating public companies using 2 methods:
0 the Comparable Companies Analysis ( for both public and private companies)
0 the DCF Analysis
On
Lecture 11 Merger Arbitrage
11.1) What is Arbitrage ?
As we have learnt in other ﬁnance courses, arbitrage is an investment strategy to take advantage
of an opportunity in which:
I one can improve on the return
I one does not need to bear any additional r
Lecture 12 Takeover Defence
12.1) Why Defend against Takeover ?
Some takeovers are classiﬁed as Hostile Takeovers' in other words, it is an attempt by the
potential bidder to acquire the target against the latter’s will, either that of management or the
m
Lecture 10 Going Private and Leverage Buyouts
10.] ) Deﬁnitions
Going Private refers to the transformation of a public corporation into a privately held ﬁrm.
A leverage buyout ( LBO ) is the purchase of a company by a small group of investors using
high p
11/23/2015
AssignmentPrintView
Score:
1.
17.50/20
Points
87.50
Award: 2.50 out of 2.50 points
%
TheMuseCo.justissuedadividendof$2.80pershareonitscommonstock.Thecompanyisexpectedto
maintainaconstant5.80percentgrowthrateinitsdividendsindefinitely.
If the st
11/30/2015
AssignmentPrintView
Score:
1.
19.20/20
96
Points
Award: 4 out of 4.00 points
%
STPCorp.usesnodebt.Theweightedaveragecostofcapitalis8percent.Ifthecurrentmarketvalueof
the equity is $13 million and there are no taxes, what is EBIT? (Enter your an
CORPORATE TAXATION IN CANADA
Prof. Michel L. Bilodeau
1
Corporate Income Taxes
Corporate taxes paid to
both the federal and
provincial governments
Income from all Sources
Less
Allowable Expenses
and Deductions
Equals
Taxable Income
Times
Tax Rate
Equals
T
SECTION I Questions 1-5 are worth 2 marks each
Answer TRUE (T) or FALSE (F) by circling the appropriate letter
1) By using a firm's WACC to analyze all potential investments, there is
no risk of T F *
incorrectly accepting some unsuitable projects
2) It i
SECTION I Questions 1-5 are worth 2 marks each
Answer TRUE (T) or FALSE (F) by circling the appropriate letter
1) A project that has a discounted payback period longer than its life
must have a positive NPV T F <
2) When multiple IRRs exist, a project mus
Capital Budgeting Techniques
A. NON-discounted CF (Cash Flow) techniques
1. Total Cash Flow (CF)
TCF = CF (NOT discounted)
2. Accounting rate of return (ARR)
Average annual [after tax] income
ARR =
Average investment over project life
3. Payback period (P
Example: n dierent letters were sent to
4 dierent addressees at random. Find the
probability that at least one goes to the right
address.
Solution. Dene events
Ai = ith letter goes to the right address
for i = 1, . . . , 4. We need to calculate
1
P (A1
Example: Nissan sold three models of cars
in North America in 1999: Sentras, Maximas
and Pathnders. Of the vehicles sold, 50%
were Sentras, 30% were Maximas and 20%
were Pathnders. In the same year 12% of
the Sentras, 15% of the Maximas and 25%
of the Pat
Denition: The cumulative distribution function (c.d.f.) F (FX ) of a random variable X
is
F (x) = P (X x) = P (cfw_s 2 S : X(s) x).
Properties of the c.d.f.:
1. 0 F (x) 1
2. If x y then F (x) F (y).
3. F ( 1) = 0, F (+1) = 1.
For any a b 2 R,
F (b)
F (a)
and then ordering these r objects in r! ways.
Therefore
n
r
r!
!
r
= Pn .
Binomial Theorem.
(a + b)n =
n
X
k=0
!
n
k
ak b n k .
Some properties.
n
k
(1) Symmetry:
!
=
n
n
k
!
(2) Pascals triangle:
n
k
1
1
!
+
1
n
k
!
=
n
k
!
.
Pn
(3) k=0
n
k
!
= 2n .
Exam
Random Variables.
Denition: A random variable (r.v.) X is a
function X : S ! R. The range of X is the
set of possible values of X.
A random variable is discrete if its range
is nite or countable innite.
A random variable is continuous if its range
is an