Explain essential hypotheses for Economic Value Added
Which are the essential hypotheses so that valuations of the Economic Value Added (EVA) give similar results to discounting cash flows?
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A Fernández (2002 and 2004) demonstrate that discounting expected EVAs gives the same value as discounting cash flows (so long as, from an accounting viewpoint, the increase in value of the Shareholders’ Equity equivalents the net income minus dividends). When E is the value of the shares and Evc is their book value, in that case:
E0 = Evc0 + VA (EVA; WACC), here EVAt = NOPATt – (Dt-1 + Evct-1) WACC
The Net Operating Profit after Taxes (NOPAT) is the profit of the unleveraged company as the profit before interests and after taxes. The Economic Value Added depends mainly upon two accounting parameters: its profit and the book value of debt and equity.
Which data is the most suitable for finding betas?
Do expected equity flows coincide along with expected dividends?
ABC Company plans to buy back 1 million shares of its own stock from its cash reserves at $50 a share. This will raise the bankruptcy costs by $10 million, and the debt/assets ratio from 35% to 40%. The income tax rate of the company is 30%. Determine the value of the
Is book value the excellent proxy to the value of the shares?
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XYZ explained the difference between intrinsic value and book value in terms of the money spent on a college education. Please provide another example using a different simile.
The ROE is the ratio among net income and Shareholders’ equity. The meaning of Return on Equity is return to shareholders. Therefore, is ROE a correct measurement of the return to shareholders?
Stock Market Crash was responsible for the Great Depression. Middle class families lost all their savings as they had gambled the market on margin.Those banks which were under the loan ofbrokers’ started removing money out of the savings account
Who proposed definition and development of low-discrepancy sequence theory or quasi random number theory?
Flow variables: Any variable, whose magnitude is evaluated over a time period, is termed as glow variable.
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