Week 6 - Case Analysis - Dividend Policy at Fuyao Glass
docx
keyboard_arrow_up
School
Trine University *
*We aren’t endorsed by this school
Course
3140
Subject
Finance
Date
Nov 24, 2024
Type
docx
Pages
9
Uploaded by MasterScience9621
Week
6
-
Case
Analysis
-
Dividend
Policy
at
Fuyao
Glass
University
of
the
Cumberland
Lahcen
Boujadi
Capstone
-
Strat
Finan
Mngmt
(BADM-691-B01)
12/03/2023
Q1
Fuyao
Glass
Industry
Group
has
been
a
strong
value
creator
in
the
automotive-glass
industry,
with
a
track
record
of
rapid
growth
and
profitability.
Their
expansion
into
the
United
States
and
Russia
further
adds
to
their
growth
potential
in
the
global
market.
The
company's
founder,
Mr.
Cho
Tak
Wong,
has
successfully
managed
to
establish
Fuyao
as
the
largest
automotive-glass
manufacturer
in
China
and
the
second-largest
in
the
world.
This
has
been
possible
due
to
their
streamlined
operations,
cutting-edge
technology
and
strategic
investments.
Fuyao's
potential
to
create
value
for
its
stakeholders
lies
in
its
ability
to
continuously
innovate
and
improve
its
production
processes,
resulting
in
cost
efficiencies
and
high-quality
products.
As
a
result,
the
company
has
been
able
to
maintain
a
strong
financial
performance
and
generate
high
cash
flows
from
operations.
Their
expansion
into
new
markets
and
the
successful
IPO
in
Hong Kong
would
provide
Fuyao
with
the
necessary
funds
to
further
invest
in
their
growth
and
increase
their
market
share.
However,
Fuyao's
potential
to
create
value
can
also
be
constrained
by
its
dependence
on
key
markets.
Any
economic
downturn
or
a
decrease
in
demand
for
automotive
products
could
negatively
impact
their
financial
performance
(Nguyen,
2022).
Additionally,
the
founder's
controlling
stake
in
the
company
could
also
limit
the
influence
of
outside
investors.
Despite
these
potential
challenges,
Fuyao's
strong
financials,
well-established
brand,
and
growth
potential
make
it
a
valuable
company
with
the
potential
to
continue
creating
value
for
its
stakeholders
(Kurznack
et
al.,
2021).
The
CFQO's
decision
to
recommend
dividends
while
balancing
the
needs
of
the
company's
growth
plans
and
shareholders'
interests
would
further
enhance
Fuyao's
reputation
as
a
value
creator
in
the
global
market.
Q2
Dividend
policy
is
not
completely
irrelevant
to
Fuyao,
as
it
is
an
important
consideration
for
any
publicly-traded
company.
However,
in
the
case
of
Fuyao,
the
decision
on
dividend
distributions
may
not
have
as
significant
of
an
impact
on
the
company's
financials
and
operations
compared
to
other
factors.
Fuyao's
CFO
must
carefully
consider
the
company's
growth
plans,
investment
needs,
and
potential
effects
of
the
IPO
when
deciding
on
dividend
distributions.
As
a
growing
company,
Fuyao
may
need
to
retain
a
significant
portion
of
its
earnings
to
fund
its
expansion
into
new
markets
and
invest
in
new
technologies.
This
may
limit
the
amount
of
funds
available
for
dividend
payouts
to
shareholders.
Furthermore,
as
the
company
is
controlled
by
its
founder
and
largest
minority
shareholder,
Mr.
Cho
Tak
Wong,
the
decision
on
dividend
distributions
may
be
influenced
by
his
personal
preferences
and
goals.
If
Mr.
Cho
Tak
Wong
prioritizes
reinvesting
profits
into
the
company's
growth,
dividend
distributions
may
be
lower
or
even
omitted
altogether.
On
the
other
hand,
dividend
policy
may
play
a
role
in
attracting
and
retaining
investors,
especially
in
the
lead
up
to
the
company's
IPO.
An
attractive
dividend
policy
can
signal
financial
stability
and
success,
which
may
be
appealing
to
potential
investors
(Boshnak,
2023).
Additionally,
dividend
payouts
can
also
provide
a
steady
source
of
income
for
existing
shareholders,
potentially
increasing
the
company's
attractiveness
to
long-term
investors.
While
dividend
policy
may
not
be
the
most
crucial
consideration
for
Fuyao,
it
is
still
an
important
factor
to
take
into
account.
Ultimately,
the
CFO
must
carefully
balance
the
needs
of
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
the
company's
expansion
and
the
desires
of
its
shareholders
when
making
dividend
distribution
recommendations.
Q3
If
Fuyao
were
to
decrease
its
dividends,
the
company
would
have
more
flexibility
in
its
cash
flows
for
the
next
year.
This
would
allow
Fuyao
to
retain
more
of
its
profits
and
potentially
use
the
cash
for
investments
and
expansion
projects.
As
a
result,
the
end-period
cash
balance
would
be
higher
than
if
the
company
were
to
maintain
or
increase
dividends.
However,
this
may
also
result
in
a
higher
degree
of
leverage
for
the
company
as
it
may
need
to
rely
on
short-term
borrowing
to
cover
any
cash
shortfalls.
If
Fuyao
were
to
maintain
its
current
dividend
policy,
the
company's
cash
flows
for
the
next
year
would
likely
be
stable.
The
end-period
cash
balance
would
be
similar
to
that
of
the
decreased
dividend
scenario,
but
the
reliance
on
short-term
borrowing
would
be
lower
as
the
company
would
have
a
steady
source
of
cash
flow
from
operations
due
to
regular
dividend
distributions.
This
scenario
would
also
provide
a
steady
and
predictable
income
stream
for
existing
and
potential
investors.
On
the
other
hand,
if
Fuyao
were
to
increase
its
dividends,
the
company's
cash
flows
for
the
next
year
would
be
more
constrained.
The
end-period
cash
balance
would
be
lower
as
the
increased
dividend
payouts
would
reduce
the
amount
of
cash
available
for
investments
and
expansion
projects.
Fuyao
may
also
have
to
rely
on
short-term
borrowing
to
meet
its
cash
needs,
potentially
increasing
the
company's
leverage.
Assumptions
about
operating
cash
flows,
capital
structure,
and
IPO
proceeds
will
have
a
significant
impact
on
Fuyao's
dividend
policy
decision.
A
higher
operating
cash
flow
projection
would
provide
the
company
with
more
flexibility
and
potential
to
increase
dividends
(Launtu,
2021).
A
more
conservative
capital
structure
would
allow
Fuyao
to
maintain
its
current
dividend
policy
without
relying
on
short-term
borrowing.
In
contrast,
higher
IPO
proceeds
could
potentially
support
an
increase
in
dividends without
negatively
impacting
the
company's
overall
financial
position.
Ultimately,
the
CFO
would
need
to
carefully
consider
all
these
factors
and
find
a
balance
between
dividend
distributions and
investment
needs
to
make
a
sound
recommendation
to
Fuyao's
board
of
directors.
Q4
Regulatory
concerns
play
a
significant
role
in
Fuyao's
dividend
decision.
As
a
publicly-
traded
company,
Fuyao
is
subject
to
the
regulations
and
guidelines
of
the
Hong
Kong
Stock
Exchange,
which
require
companies
to
distribute
a
certain
percentage
of
their
profits
as
dividends
(Wang
et
al.,
2021).
The
CFO
will
need
to
ensure
that
the
company's
dividend
policies
comply
with
these
regulations
in
order
to
maintain
a
good
standing
with
the
exchange
and
avoid
any
penalties
or
negative
repercussions.
Moreover,
Fuyao's
upcoming
IPO
also
adds
pressure
to
the
dividend
decision.
The
company
will
need
to
attract
potential
investors
and
demonstrate
its
strong
financial
performance
and
future
prospects.
This
means
that
the
CFO
will
need
to
carefully
consider
the
signaling
effect
of
the
company's
dividend
decision
on
potential
investors.
A
higher
dividend
payout
may
signal
that
the
company
is
confident
in
its
future
growth
and
profitability,
while
a
lower
payout
may
indicate
financial
constraints
or
lack
of
confidence.
Therefore,
the
CFO
will
need
to
strike
a
balance
between
meeting
regulatory
requirements
and
sending
a
positive
signal
to
potential
investors.
Shareholder
preferences
also
play
a
role
in
Fuyao's
dividend
decision.
As
the
company
is
controlled
by
its
founder
and
largest
minority
shareholder,
Mr.
Cho
Tak
Wong,
his
preferences
and
expectations
regarding
dividends
will
need
to
be
taken
into
consideration.
Shareholders
often
expect
a
return
on
their
investment
in
the
form
of
dividends,
and
the
CFO
will
need
to
consider
the
impact
of
the
dividend
decision
on
the
company's
relationship
with
its
shareholders.
Regulatory
concerns,
signaling
to
future
investors,
and
shareholder
preferences
all
play
a
crucial
role
in
Fuyao's
dividend
decision.
The
CFO
will
need
to
carefully
weigh
these
factors
and
make
a
strategic
decision
that
balances
the
needs
of
the
company
with
the
expectations
of
its
stakeholders.
Q5
Cho
Tak
Wong's
leadership
has
played
a
significant
role
in
the
value
of
Fuyao
Glass
Industry
Group.,
Ltd.
and
the
company's
dividend
policy.
Firstly,
Cho's
strategic
vision,
determination,
and
hands-on
approach
have
propelled
Fuyao
to
become
the
largest
automotive-glass
manufacturer
in
China
and
one
of
the
top
players
in
the
global
market.
Under
his
leadership,
the
company
has
achieved
rapid
growth
and
profitability,
which
has
significantly
increased
its
overall
value.
Furthermore,
Cho's
strong
focus
on
innovation
and
expanding
into
new
markets
has
also
contributed
to
the
company's
increased
value.
By
investing
in
cutting-edge
technology
and
expanding
their
business
globally,
Fuyao
has
been
able
to
gain
a
competitive
advantage
and
establish
itself
as
a
leader
in
the
automotive-glass
industry
(Zhao,
2023).
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
In
terms
of
the
company's
dividend
policy,
Cho's
leadership
style,
which
prioritizes
the
long-term
growth
and
success
of
the
company,
has
resulted
in
a
conservative
dividend
policy.
This
means
that
Fuyao
generally
retains
a
significant
portion
of
its
profits
for
reinvestment
in
the
business,
rather
than
distributing
them
as
dividends.
This
approach
has
allowed
the
company
to
fund
its
expansion
plans
and
maintain
a
strong
financial
position,
which
has
further
increased
its
value.
Additionally,
as
the
largest
minority
shareholder,
Cho's
interest
in
maximizing
shareholder
value
has
also
influenced
the
company's
dividend
policy.
His
decision
to
keep
dividends
at
a
reasonable
level
has
ensured
that
the
company
has
enough
cash
reserves
to
fund
its
ambitious
growth
plans,
thus
benefiting
all
shareholders
in
the
long
run.
Cho
Tak
Wong's
leadership
has
been
crucial
in
driving
Fuyao's
growth
and
success,
which
has
ultimately
led
to
increased
value
for
the
company
and
its
shareholders.
His
strategic
decisions
and
conservative
dividend
policy
have
played
a
significant
role
in
maintaining
the
financial
stability
and
future
prospects
of
the
company.
Q6
As
a
board
member
of
Fuyao,
I
understand
the
importance
of
balancing
the
needs
and
expectations
of
both
our
existing
and
potential
investors.
After
analyzing
the
company's
financials
and
considering
the
various
factors
at
play,
I
propose
a
dividend
payout
of
30%
of
our
net
income
for
the
current
fiscal
year.
My
proposal
is
based
on
the
following
reasons:
1.
To
maintain
investor
confidence:
Dividends
are
a
signal
of
a
company's
financial
health
and
potential
for
future
growth.
By
maintaining
a
consistent
and
reasonable
dividend
payout,
we
can
assure
our
existing
investors
of
our stability
and
attract
potential
investors
looking
for
a
steady
return
(Verga
Matos
et
al.,
2020).
2.
To
fund
our
expansion
plans:
Fuyao
is
in
the
midst
of
significant
global
expansion,
and
we
need
to
ensure
we
have
enough
funds
to
support
these
plans.
While
retaining
a
portion
of
our
earnings
for
reinvestment
is
crucial,
a
higher
dividend
payout
will
also
give
us
the
necessary
funds
to
continue
our
growth
trajectory
(Biswas
et
al.,
2022).
3.
To
align
with
industry
standards:
Considering
our
position
as
the
second-largest
and
fastest-growing
automotive-glass
manufacturer
globally,
it
is
essential
to
align
our
dividend
policy
with
industry
standards.
Other
companies
in
the
same
league,
such
as
Saint-Gobain,
have
a
dividend
payout
ratio
of
around
30%,
further
supporting
my
proposal.
4.
To
please
our
majority
shareholder:
As
the
founder
and
largest
minority
shareholder,
Mr.
Cho
Tak
Wong's
opinion
holds
significant
weight
in
the
decision-making
process.
A
30%
dividend
payout
would
be
acceptable
to
both
our
existing
investors
and
Mr.
Wong,
ensuring
his
continued
support
and
involvement
in
the
company.
In
my
opinion,
a
30%
dividend
payout
strikes
the
right
balance
between
rewarding
our
investors
and
securing
the
necessary
funds
for
our
expansion
plans.
I
urge
my
fellow
board
members
to
consider
this
proposal
and
come
to
a
unanimous
decision
in
favor
of
a
30%
dividend
payout
for
this
fiscal
year.
References
Biswas,
S.,
Bandyopadhyay,
G.,
&
Mukhopadhyaya,
J.
N.
(2022).
A
multi-criteria
framework
for
comparing
dividend
pay
capabilities:
Evidence
from
Indian
FMCG
and
consumer
durable
sector.
Decision
Making:
Applications
in
Management
and
Engineering,
5(2),
140-175.
Boshnak,
H.
A.
(2023).
The
impact
of
board
composition
and
ownership
structure
on
dividend
payout
policy:
evidence
from
Saudi
Arabia.
International
Journal
of
Emerging
Markets,
18(9),
3178-3200.
Kurznack,
L.,
Schoenmaker,
D.,
&
Schramade,
W.
(2021).
A
model
of
long-term
value
creation.
Journal
of
Sustainable
Finance
&
Investment,
1-19.
Launtuy,
A.
(2021).
Impact
of
Cash
Flow
and
Dividend
Policy
on
Manufacturing
Firm
Value.
ATESTASI:
Jurnal
Ilmiah
Akuntansi,
4(1),
105-111.
Nguyen,
H.
T.
X.
(2022).
The
effect
of
COVID-19
pandemic
on
financial
performance
of
firms:
empirical
evidence
from
Vietnamese
logistics
enterprises.
The
Journal
of
Asian
Finance,
Economics
and
Business,
9(2),
177-183.
Verga
Matos,
P.,
Barros,
V.,
&
Miranda
Sarmento,
J.
(2020).
Does
ESG
affect
the
stability
of
dividend
policies
in
Europe?.
Sustainability,
12(21),
8804.
Wang,
H.,
Jia,
M.,
&
Zhang,
Z.
(2021).
Good
deeds
done
in
silence:
Stakeholder
management
and
quiet
giving
by
Chinese
firms.
Organization
Science,
32(3),
649-674.
Zhao,
J.
(2023).
Building
the
World’s
Most
Competitive
Professional
Supplier
of
Auto
Glass:
A
Case
Study
of
the
Fuyao
Group.
In
The
Challenge
of
“Going
Out”
Chinese
Experiences
in
Outbound
Investment
(pp.
181-187).
Singapore:
Springer
Nature
Singapore.
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Related Questions
Companies and growth rates
Future value and present value concepts are applied in various ways, such as calculating growth rates, earnings per share, expected sales and revenues in the future, and so forth.
Consider the following case:
Pharmacist John S. Pemberton invented a soft drink in 1886 that eventually became not only an integral part of everyday life in the United States but also a symbol of consumerism worldwide. In 1929 the first Coca-Cola vending machines were installed in Germany, and in 1930, the German branch of the Coca-Cola Co. opened in Essen.
Coca-Cola sales in Germany were 243,000 cases in 1934, 1 million cases in 1936, and 4.5 million cases in 1939.
Q1. Germany was a growing market for Coca-Cola, along with other countries in Europe, before World War II. With the previous data given, calculate the company’s sales growth rate for each time period in the following table:
Years
Growth Rate
1934–1936
?
1936–1939
?
1934–1939
?
During World War…
arrow_forward
None
arrow_forward
Companies invest in expansion projects with the expectation of increasing the earnings of its business.
Consider the case of McFann Co.:
McFann Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs:
Year 4
Year 3
4,100 4,300
4,400
$30.31
$33.19
$30.00
$13.45 $14.02 $14.55
$41,670 $41,890 $40,100
Year 1 Year 2
Unit sales.
4,200
$29.82
Sales price
Variable cost per unit
$12.15
Fixed operating costs $41,000
This project will require an investment of $20,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at
t=0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project's four-year life.
McFann pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project's net present
value (NPV) would be under the new tax law.
Which of the following most closely approximates what…
arrow_forward
(Identifying incremental revenues from new product innovations) Morten Food Products, Inc. is a
regional manufacturer of salty food snacks. The firm competes directly with the national brands
including Frito-Lay, but only in the U.S. Southeast. Last year Morten sold $300 million of its various chip
products and hopes to increase its sales in the coming year by offering a new line of baked chips. The new
product line is expected to generate $42 million in sales next year. However, the firm's analysts estimate that
about 45 percent of these revenues will come from existing customers who switch their purchases from one
of the firm's existing products to the new healthier baked chips.
a. What level of incremental sales should the company analyst attribute to the new line of baked chips?
b. Assume that 25 percent of Morten's existing customers are actively looking for a healthier snack
alternative and will move to another company's baked chip offering if Morten does not introduce the new…
arrow_forward
How do I calculate brand value percentage of the Market Cap?
arrow_forward
The Balanced Scorecard; Strategy McDonald’s is a global fast-food chain with 36,889 restaurants worldwide and global sales of $95 billion in 2016. McDonald’s is one of the most successfulcompanies, with stock values increasing steadily to an all-time high of over $150 in June 2017. A newlow-price menu, a new Big Mac, and all-day breakfast have helped a lot. However, McDonald’s isalways concerned by challenges by competitors such as Wendy’s and Taco Bell.Required1. What is McDonald’s competitive strategy (cost leadership or differentiation)? Briefly explain youranswer. What strategy is used by Wendy’s and Taco Bell?2. Would McDonald’s benefit from the use of a balanced scorecard? Why or why not? What would besome of the critical success factors in McDonald’s balanced scorecard?3. As a global company, McDonald’s is subject to the risk of foreign currency fluctuations. Explain howchanges in foreign currency exchange rates could affect the company. How has the trend to economicnationalism…
arrow_forward
6. Companies and growth rates
Future value and present value concepts are applied in various ways, such as calculating growth rates, earnings per share, expected sales and revenues in the future, and so forth.
Consider the following case:
Pharmacist John S. Pemberton invented a soft drink in 1886 that eventually became not only an integral part of everyday life in the United States but also a symbol of consumerism worldwide. In 1929 the first Coca-Cola vending machines were installed in Germany, and in 1930, the German branch of the Coca-Cola Co. opened in Essen.
Coca-Cola sales in Germany were 243,000 cases in 1934, 1 million cases in 1936, and 4.5 million cases in 1939.
Germany was a growing market for Coca-Cola, along with other countries in Europe, before World War II. With the previous data given, calculate the company’s sales growth rate for each time period in the following table:
Years
Growth Rate
1934–1936
1936–1939
1934–1939…
arrow_forward
Please answer fast I will rate for you sure....
arrow_forward
6. Companies and growth rates
Future value and present value concepts are applied in various ways, such as calculating growth rates, earnings per share, expected sales and revenues in the future, and so forth.
Consider the following case:
A. Pharmacist John S. Pemberton invented a soft drink in 1886 that eventually became not only an integral part of everyday life in the United States but also a symbol of consumerism worldwide. In 1929 the first Coca-Cola vending machines were installed in Germany, and in 1930, the German branch of the Coca-Cola Co. opened in Essen.
Coca-Cola sales in Germany were 243,000 cases in 1934, 1 million cases in 1936, and 4.5 million cases in 1939.
Germany was a growing market for Coca-Cola, along with other countries in Europe, before World War II. With the previous data given, calculate the company’s sales growth rate for each time period in the following table:
Years
Growth Rate
1934–1936
1936–1939
1934–1939…
arrow_forward
You are trying to value Lucid Motors using comparables analysis. You believe Lucid Motors should be valued similarly to TSLA and that TSLA is the only reasonable comparison. TSLA is currently trading at 10.7x Enterprise Value/Revenue. Lucid is expected to generate $2.2bn in revenues this year. How mucb should you be willing to value Lucid in terms of enterprise Value (assuming market is correct)?
$20.6bn
$23.5bn
$15.4 bn
$21.7 bn
arrow_forward
Question 2
You are a senior investment consultant at Mercer Investment Consulting. You have
been appointed by Qatar Investment Authority to pick an investment manager to
oversee a US$1 billion portfolio of Asian Equites. Based on your research you identify
two managers who have made your shortlist. The following data is provided for your
consideration which shows performance over the past ten years:
Manager Actual Av Return Standard Deviation
A
B
12.20%
10.80%
14.00%
(b) What is the alpha for Manager A and B?
11.90%
Beta
1.40
1.00
The risk-free rate is 3.5% and the risk premium for the market portfolio is 6%.
(a) Using the CAPM, calculate the expected returns for Manager A and B.
(c) Which manager would you choose for your client? Justify your answer.
arrow_forward
Segment Analysis for a Service Company
Charles Schwab Corporation is one of the more innovative brokerage and financial service companies in the United States. The company recently provided information about its major business segments as follows (in millions):
Investor
Advisor
Services
Services
Revenues
$7,321
$2,811
Income from operations
3,176
1,386
Depreciation
186
120
a. The ____ segment serves the retail customer, you and me. These include brokerage, Internet, and mutual fund services. The ____ segment includes the same services provided for financial institutions, such as banks, mutual fund managers, insurance companies, and pension plan administrators.
b. Indicate whether the following costs are a “Variable Cost” or a “Fixed Cost” in the “Investor Services“.
1. Commissions to brokers _____2. Fees paid to exchanges for executing trades_____
3. Depreciation on brokerage offices _______4. Transaction fees incurred by Schwab mutual funds to…
arrow_forward
I need help with this problem and accounting question
arrow_forward
I want the correct answer with accounting question
arrow_forward
SEE MORE QUESTIONS
Recommended textbooks for you
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Related Questions
- Companies and growth rates Future value and present value concepts are applied in various ways, such as calculating growth rates, earnings per share, expected sales and revenues in the future, and so forth. Consider the following case: Pharmacist John S. Pemberton invented a soft drink in 1886 that eventually became not only an integral part of everyday life in the United States but also a symbol of consumerism worldwide. In 1929 the first Coca-Cola vending machines were installed in Germany, and in 1930, the German branch of the Coca-Cola Co. opened in Essen. Coca-Cola sales in Germany were 243,000 cases in 1934, 1 million cases in 1936, and 4.5 million cases in 1939. Q1. Germany was a growing market for Coca-Cola, along with other countries in Europe, before World War II. With the previous data given, calculate the company’s sales growth rate for each time period in the following table: Years Growth Rate 1934–1936 ? 1936–1939 ? 1934–1939 ? During World War…arrow_forwardNonearrow_forwardCompanies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of McFann Co.: McFann Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs: Year 4 Year 3 4,100 4,300 4,400 $30.31 $33.19 $30.00 $13.45 $14.02 $14.55 $41,670 $41,890 $40,100 Year 1 Year 2 Unit sales. 4,200 $29.82 Sales price Variable cost per unit $12.15 Fixed operating costs $41,000 This project will require an investment of $20,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t=0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project's four-year life. McFann pays a constant tax rate of 25%, and it has a weighted average cost of capital (WACC) of 11%. Determine what the project's net present value (NPV) would be under the new tax law. Which of the following most closely approximates what…arrow_forward
- (Identifying incremental revenues from new product innovations) Morten Food Products, Inc. is a regional manufacturer of salty food snacks. The firm competes directly with the national brands including Frito-Lay, but only in the U.S. Southeast. Last year Morten sold $300 million of its various chip products and hopes to increase its sales in the coming year by offering a new line of baked chips. The new product line is expected to generate $42 million in sales next year. However, the firm's analysts estimate that about 45 percent of these revenues will come from existing customers who switch their purchases from one of the firm's existing products to the new healthier baked chips. a. What level of incremental sales should the company analyst attribute to the new line of baked chips? b. Assume that 25 percent of Morten's existing customers are actively looking for a healthier snack alternative and will move to another company's baked chip offering if Morten does not introduce the new…arrow_forwardHow do I calculate brand value percentage of the Market Cap?arrow_forwardThe Balanced Scorecard; Strategy McDonald’s is a global fast-food chain with 36,889 restaurants worldwide and global sales of $95 billion in 2016. McDonald’s is one of the most successfulcompanies, with stock values increasing steadily to an all-time high of over $150 in June 2017. A newlow-price menu, a new Big Mac, and all-day breakfast have helped a lot. However, McDonald’s isalways concerned by challenges by competitors such as Wendy’s and Taco Bell.Required1. What is McDonald’s competitive strategy (cost leadership or differentiation)? Briefly explain youranswer. What strategy is used by Wendy’s and Taco Bell?2. Would McDonald’s benefit from the use of a balanced scorecard? Why or why not? What would besome of the critical success factors in McDonald’s balanced scorecard?3. As a global company, McDonald’s is subject to the risk of foreign currency fluctuations. Explain howchanges in foreign currency exchange rates could affect the company. How has the trend to economicnationalism…arrow_forward
- 6. Companies and growth rates Future value and present value concepts are applied in various ways, such as calculating growth rates, earnings per share, expected sales and revenues in the future, and so forth. Consider the following case: Pharmacist John S. Pemberton invented a soft drink in 1886 that eventually became not only an integral part of everyday life in the United States but also a symbol of consumerism worldwide. In 1929 the first Coca-Cola vending machines were installed in Germany, and in 1930, the German branch of the Coca-Cola Co. opened in Essen. Coca-Cola sales in Germany were 243,000 cases in 1934, 1 million cases in 1936, and 4.5 million cases in 1939. Germany was a growing market for Coca-Cola, along with other countries in Europe, before World War II. With the previous data given, calculate the company’s sales growth rate for each time period in the following table: Years Growth Rate 1934–1936 1936–1939 1934–1939…arrow_forwardPlease answer fast I will rate for you sure....arrow_forward6. Companies and growth rates Future value and present value concepts are applied in various ways, such as calculating growth rates, earnings per share, expected sales and revenues in the future, and so forth. Consider the following case: A. Pharmacist John S. Pemberton invented a soft drink in 1886 that eventually became not only an integral part of everyday life in the United States but also a symbol of consumerism worldwide. In 1929 the first Coca-Cola vending machines were installed in Germany, and in 1930, the German branch of the Coca-Cola Co. opened in Essen. Coca-Cola sales in Germany were 243,000 cases in 1934, 1 million cases in 1936, and 4.5 million cases in 1939. Germany was a growing market for Coca-Cola, along with other countries in Europe, before World War II. With the previous data given, calculate the company’s sales growth rate for each time period in the following table: Years Growth Rate 1934–1936 1936–1939 1934–1939…arrow_forward
- You are trying to value Lucid Motors using comparables analysis. You believe Lucid Motors should be valued similarly to TSLA and that TSLA is the only reasonable comparison. TSLA is currently trading at 10.7x Enterprise Value/Revenue. Lucid is expected to generate $2.2bn in revenues this year. How mucb should you be willing to value Lucid in terms of enterprise Value (assuming market is correct)? $20.6bn $23.5bn $15.4 bn $21.7 bnarrow_forwardQuestion 2 You are a senior investment consultant at Mercer Investment Consulting. You have been appointed by Qatar Investment Authority to pick an investment manager to oversee a US$1 billion portfolio of Asian Equites. Based on your research you identify two managers who have made your shortlist. The following data is provided for your consideration which shows performance over the past ten years: Manager Actual Av Return Standard Deviation A B 12.20% 10.80% 14.00% (b) What is the alpha for Manager A and B? 11.90% Beta 1.40 1.00 The risk-free rate is 3.5% and the risk premium for the market portfolio is 6%. (a) Using the CAPM, calculate the expected returns for Manager A and B. (c) Which manager would you choose for your client? Justify your answer.arrow_forwardSegment Analysis for a Service Company Charles Schwab Corporation is one of the more innovative brokerage and financial service companies in the United States. The company recently provided information about its major business segments as follows (in millions): Investor Advisor Services Services Revenues $7,321 $2,811 Income from operations 3,176 1,386 Depreciation 186 120 a. The ____ segment serves the retail customer, you and me. These include brokerage, Internet, and mutual fund services. The ____ segment includes the same services provided for financial institutions, such as banks, mutual fund managers, insurance companies, and pension plan administrators. b. Indicate whether the following costs are a “Variable Cost” or a “Fixed Cost” in the “Investor Services“. 1. Commissions to brokers _____2. Fees paid to exchanges for executing trades_____ 3. Depreciation on brokerage offices _______4. Transaction fees incurred by Schwab mutual funds to…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT