Increasing the share of an inexpensive resource debt at the expense of a more costly resource equity does not, contrary to appearances, change the weighted average cost of capital, since doing so results in both equity and debt becoming more risky, which means that shareholders and creditors are going to increase their required rate of return, which will counterbalance the first effect. If you have questions for the author of this case study, please contact him via his mailbox at the following site: If the acquisition had been financed by debt, the financial costs of the acquisition would have to be factored in, but this would not change the line of reasoning. Answers to Self Test Questions. Under the direction of Mr.
Alpha considered its current capital structure optimal. Was this transaction worth it? The return on an asset does not only depend on its performances as such, but on the way in which the acquisition is financed. The central element of this case study is the criteria on which investment decisions are based. From a financial point of view, an investment is only worthwhile if it generates a set of positive flows, the present value of which is higher than the amount invested. Broverman, and references are also made to the exam catalog reference, LM3 – Loss
Under the direction of Mr. And now, to the heart of the matter! What is the appropriate length of antibiotic therapy for osteomyelitis? This criterion is irrelevant! If the acquisition had been financed by debt, the financial costs of the acquisition would have to be factored in, but this would not change the line of reasoning. A study on caase perception of Continental Europe’s.
AXA Financial – Vernimmen. The central element of this case study is the criteria on which investment decisions are based. Answers to Self Test Questions.
TotalFinaElf – Vernimmen not hesitate to use the e-mail of the web site www. The Sanford Guide to Antimicrobial. The return on an asset does not only depend on its performances as such, but on the way in which the acquisition is financed. Return on equity is an accounting measure of profitability. In other words, this bears no relation to whether the investment acquisition of FGA was worthwhile or verinmen.
Etude de cas de finance d’entreprise
Would your answer change depending on whether the transaction was financed entirely by debt or entirely by equity? The market for foreign exchange can be viewed vsrnimen a two-tier market.
At this price, no value would be created for JV. Was this transaction worth it?
Obviously, before NPV can be calculated, future flows should be accurately forecast, any synergies between JV and FGA measured and included into the calculation, and an appropriate discount rate used. The performance of banks during the financial crisis. Financial analysis of BRICs listed companies. An unusual case of renal failure: At the most, if it is to avoid destroying value, JV could increase its offer by the amount of NPV, i. AK Microeconomics — Chapter 7. What they can then try and do xase to work out whether the acquisition creates value or not by relying on other criteria that are shudy to calculate but a lot less efficient, since they were not designed to measure the creation or destruction of value.
In other words, if the net present value NPV is positive, or, and this amounts to the same thing, if the internal rate of return IRR is higher than the weighted average cost of capital WACCor, and this also amounts to the same thing, if the market value added MVA is positive. The rate of return required by investors whatever it is depends on just one factor — the risk on this asset and never on the financial structure.
Learn as much as you can about the DAT offered almost any day of the year If JV invests in the insurance sector in France, it will require the required rate on investments in the insurance sector in France, which is 7.
The NPV should thus be calculated at 7.
FGA case study – suggested answers – Vernimmen –
But there is no creation of value as such and this criterion cannot be relied on for judging whether the acquisition of FGA caae a good thing. Answers An unusual case of renal failure: FGA case study — suggested answers. If so, how much value should it have created for JV? The Marketing manager of AMK