Corporate Finance Case Study - 1402 Words

Solution to Case 23 Evaluating Project Risk It’s Better to Be Safe Than Sorry! Questions: 1. What seems to be wrong with the way the NPV of each project has been calculated? Indicate without any calculations, how Pete and John should go about recalculating the projects’ NPVs. The NPV of each project has been calculated by discounting the cash flows at the 8% before-tax cost of debt. This is incorrect. Since the company has debt, preferred stock and common stock in its capital structure the weighted average cost of capital must be calculated and used to discount the projects’ cash flows. The weight of each component of the target capital structure (based on market values of outstanding securities)†¦show more content†¦Please explain. TABLE 6 Expected Growth Rate of Sales†¦ 25% Expected Growth Rate of Earnings and Dividends†¦ 12% Expected Return on the Market†¦.. 15% Treasury bill rate†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 6% Expected retention rate†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 60% Firm’s Equity Beta†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 1.2 AFTER-TAX COST OF DEBT (Without flotation costs) Calculate the Yield to maturity on the firm’s outstanding 8%, 20-year bonds which are currently selling at $900. PMT = 80; FV = 1000; N=20; PV = -900; CPT I% = 9.10% After-tax cost of debt = YTM*(1-Tax rate) = 9.1*(1-.4) = 5.46% COST OF PREFERRED STOCK (without flotation costs) = Dividend/Price of Preferred Stock = $0.6/$12 = 5% COST OF EQUITY (without flotation costs) Based on CAPM = Risk-free rate + Beta (Expected Market Return – Risk-free rate) = 6% + 1.2 (15% - 6%) = 6 + 10.8% = 16.8% Based on Dividend Discount Model = [D0 (1+g)/P0] + g = .51(1.12) / $25 + .12 = 14.28% Average of two estimates = (16.8 + 14.8)/2 = 15.54% These costs can and most likely will change as the firm’s overall level of debt increases. These changes will be caused by increased issue costs and increased risk premiums. For example: Once the firm uses up all of its available retained earnings, its cost of equity willShow MoreRelatedCorporate Finance Case Study3492 Words   |  14 Pagesinterest of the Italian State to buy this stake before the group is put on the market so as to present a streamlined structure? Or would it be preferable to leave things as they are? Why? TABLE OF CONTENTS 1. Executive summary In the above case study Roberto Group incepted 30 years ago by IRI one of the largest holding companies by the Italian government. is being planned to be sold out by the Italian state. 2. In a few phrases, describe the situation of the Roberto and Chez Leon chainsRead MoreCorporate Finance Case Study3498 Words   |  14 Pagesof the Italian State to buy this stake before the group is put on the market so as to present a streamlined structure? Or would it be preferable to leave things as they are? Why? TABLE OF CONTENTS 1. Executive summary In the above case study Roberto Group incepted 30 years ago by IRI one of the largest holding companies by the Italian government. is being planned to be sold out by the Italian state. 2. In a few phrases, describe the situation of the Roberto and Chez Leon chainsRead MoreCase Study : Corporate Finance And Investment Planning Essay5132 Words   |  21 PagesAmity Business School Amity University Uttar Pradesh Noida, U.P. July, 2015 Declaration I, Harshit Goel, student of B.Tech ECE + MBA, Amity Business School, Amity University Uttar Pradesh, Noida, hereby declare that the project titled â€Å"Corporate Finance and Investment Planning† which is submitted by me and carried out at Micromax Informatics Ltd. 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Public Relations and Communication Business Management

Question: Discuss about the Public Relations and Communication Business Management. Answer: Introduction Effective communication is of an utmost importance to most of the aspects of human life such as in educational institution, workplace and public gathering places. The importance of communication can only be measured with its consequence on the respective society or place. However, effective communication can be termed as a fact, which is necessary to address to the dialogic exchanges in between the listener or the speaker. The development of effective communication in a person is influenced by its every changing stage in life such as in school or degree colleges and at workplace (Guffey and Loewy 2012). The main purpose of this assignment is to understand the effectiveness of a communication of irrespective types and the some useful tips to measure it. Incident related to poor communication One of the most weird example of poor communication have had happened in my organization where I am working as an IT expert. The incident took place when one of the supervisors did complain about some of the faulty behaviour of the computer system. The complaint was responded efficiently from the team of IT experts. However, the problem required the inclusion of added RAM in the system, which indeed needs to be addressed to the higher management to avail the required financial support. The IT expert did ask the supervisors to send a mail to the IT department citing the whole incident. In spite of informing to the IT department through mailing, the supervisors did forget to address the issue by sending the mail to the IT department (Grunig 2013). The poor communication in between the supervisors and the IT department did result in no work done related to the system. This indeed became responsible for the persistence of the problem even further. It certainly wasted some significant time as well as it also hampered the project as it was close to the assigned deadlines. Drafting a mail is the most acceptable mode of establishing a formal communication within the organization. It could have been sorted out quite efficiently if there were no such negligence from the supervisors part. The best way to ignore such communication gap is the prioritising of the tasks based on their importance. The highlighted problem should have been prioritised as the project was nearing its set deadline (Kaul 2014). Dialogic communication is perhaps the best mode to facilitate strategy making in organizations. The dialogic communication at the workplace in the recent past has taken a significant change in recent time. In the past, the importance of dialogic communication was not known. This has resulted in certain communication related failure, which also influenced the business operation. Some of the communication related gap was found when mail was not sent to the IT department, which eventually hampered the project. However, in recent time, there has been a strict instruction from the management to maintain a healthy mailing practice. The supervisors and al the high positioned staffs of the Company are engaged in a good mailing practice. They have understood the importance of professional mode of communication (Cornelissen 2014). Dialogic Communication is very important in business terms. This is because of the fact that it helps in making the strategies, proposing actions and implementing the discussed actions. Dialogic communication involves the participation of all the attendees for receiving some valuable feedbacks and suggestions. It is an undeniable fact that strategy making involves the understanding of every domains of working at the workplace. For example, to impose some working guidelines into an organization, it is important to have discussions with the HRM for discussing over the proposed changes. This provides ample of moment to the HRM to understand exactly the matter of discussion. This indeed is helpful when they would contact and have discussions with the employees over the proposed changes. Dialogic form of communication is perhaps the most productive form of communication that is in practice. This is because of the fact that it encourages knowledge sharing in between the speakers and the li steners. This also effectively facilitates the smooth progress of the meeting as the interest level of participants is aroused by their sheer concentration and understanding of the transformed information (Chen, Chiang and Storey 2012). Ideal Business Communication Skills Business communication skills can be developed in numerous ways as understood from the above discussions on the dialogic form of communication. The insights that can be derived from the above discussion are as follows that are extremely helpful in developing and improving the business communication: The listening skills are perhaps one of the most effective factors for improving the business communication. This is because of the fact that it helps in catching and transforming the grabbed information to a more developed form of business operation. Attentiveness, which is another part of active listening, is something that facilitates the transformation of information from the higher management to tie employees. It is often observed that employees those are less attentive tends to lose their grip on the matter of discussion. Attentiveness helps in collecting, transforming and understanding the grabbed information (Martin and Nakayama 2013). Collaborative approach during the discussion Dictatorship would certainly hamper the interest level of participants. This is because of the fact that they tend to perceive this as some kinds of lectures. This is because of a psychological problem of human being, which generally encourages them for not liking any kinds of lectures. This is indeed important for the speaker to understand the mentality of the participants and act accordingly. However, this is indeed difficult to analyse the mentalities of all the participants. This is not feasible with respect to the time allotment. The best way to go for a talkative session is to stick with the dialogic form of communication, which invites every participant for addressing the issue with some useful suggestions and feedbacks. Collaborative approach does also bring harmonization of work spirit within the organization. This happens because of the fact that it forms a bonding in between al the participators of the discussions (Petty and Cacioppo 2012). Sensitive issues should be addressed to the higher management for avoiding any communication gap at the workplace. Sensitive issues can be of any type such as urgent repairing of tools and devices that are important for the operation. The damages that are done to the tools and the devices needs to be addressed to the higher management through the medium of professional communication modes. Drafting a mail to the respective department would be the best professional mode to address the issue. This is one of the vital parts of an organization that needs to be addressed quickly in order to prevent the organization from any such potential damages. Quick responses are important to have competitive edge in the market as this brings effective and quick responses against the changing face and demand of the market (Castells 2013). Enhancing the learning memory Enhancement of memorising power is of utmost importance to the development of interpersonal communication skills. Efforts should be given to memorise important events at the workplace. This is helpful in avoiding the communication related gaps to some extent. For example, if someone is asked to address the issue to the higher management through mail, it becomes necessary for the particular to memorise the instructions. Moreover, if it does not do so, it would fall short of making any commitment fulfilled (Cornelissen 2014). The different forms of insights that are mentioned above are indicative in their nature as they facilitate knowledge sharing in between the person and the insights methods. All the above-mentioned factors are extremely helpful in educating an individual on the business communication perspectives. This is because of the fact that these communication development techniques infuse sufficient amount of knowledge into its bearer. Moreover, the educative transformation of knowledge on the communication is helpful in judging the personal position in terms of interpersonal business communication (Grunig 2013). Conclusion Communication is very important for everyone in this world; however, it grows in its importance when it reaches to the organizational level. The area of working of an organization is very high, which makes this a challenge for all the associate people to have a smooth interpersonal communication. There is no place to any communication related failure in an organization. The failure can only be entertained if it has not hampered any business operations; however, the incurred losses would leave any place of consolidation to the communication related failure. References Castells, M., 2013.Communication power. OUP Oxford. Chen, H., Chiang, R.H. and Storey, V.C., 2012. Business intelligence and analytics: From big data to big impact.MIS quarterly,36(4), pp.1165-1188. Cornelissen, J., 2014.Corporate communication: A guide to theory and practice. Sage. Grunig, J.E., 2013.Excellence in public relations and communication management. Routledge. Guffey, M.E. and Loewy, D., 2012.Essentials of business communication. Cengage Learning. Kaul, A., 2014.Effective business communication. PHI Learning Pvt. Ltd.. Martin, J.N. and Nakayama, T.K., 2013.Experiencing intercultural communication. McGraw-Hill Higher Education. Petty, R. and Cacioppo, J., 2012.Communication and persuasion: Central and peripheral routes to attitude change. Springer Science Business Media.