Nobody downloaded yet

Principles of Finance - Essay Example

Comments (0) Cite this document
Summary
The method involves making adjustments on the most current balance sheet by substituting the market value of each asset for book value where applicable. The net asset value is, therefore, the adjusted book value which is obtained by using shareholders equity to balance the…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER96.9% of users find it useful
Principles of Finance
Read TextPreview

Extract of sample
"Principles of Finance"

Download file to see previous pages When tax is reduced by some percentage it increases companys income by certain multiplier effect since tax is a leakage on income. When tax is reduced to 18%, the taxation will be 90.16pounds (Adams & Von, 2007).
b) The assumption is subject to discussion in such a way that each of these methods has their strengths and weaknesses. Taking a case of dividend growth rate, empirical evidence shows that a company, which pays more dividends, has low growth rate. The main reason behind this is that most of its profits go to individual shareholders instead of being ploughed back to the business. This is practical evidence. However, most of the methods are theoretical and lack practicality (Halsey, R. F, 2012).
Considering the case of net asset valuation, the method does not consider the future prospects of the company. In fact, these valuation methods depend on historical data, but in a business environment, different environmental factors lead to different outcomes. This is a limitation that begs the question whether the methods are practical because the business environment changes every day and cannot rely on historical data (Halsey, 2000).
The book value approach in asset based method is practically unrealistic because the values of the fixed assets depend on sunk costs and relative depreciation. These values are of no relevance to any purchaser or seller (Von, et al., 2004). In considering replacement value, it is also of no practicality. This shows what it might cost to start a business, but this could be lower than the true value for successful business unless the estimation is also made for the value of goodwill and other current assets. In considering the P/E approach, it is not somehow practical. When you are buying a company it is for the entitlement of its future earnings not past earnings.
This approach does not take into account turbulent economic times which make them very ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Principles of Finance Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Retrieved from https://studentshare.org/finance-accounting/1673317-principles-of-finance
(Principles of Finance Essay Example | Topics and Well Written Essays - 1000 Words)
https://studentshare.org/finance-accounting/1673317-principles-of-finance.
“Principles of Finance Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/finance-accounting/1673317-principles-of-finance.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Principles of Finance
...the expected cash flows from an investment (Atrill & McLaney, 1994). Conclusion The assessment of the Dynamo Project using the NPV, IRR, payback and the profitability index reveals that it would not be advisable to take up this project unless the life of the project is more than 10 years. This is because the project is expected to generate relatively more cash inflows in the subsequent years as compared to the preliminary years. References Atrill, P., & McLaney, E., (1994). Management Accounting: An Active Learning Approach. Wiley- Blackwell. Broyles, J. E., (2003). Financial Management and Real Options. John Wiley & Sons. Horngren, C., (2008). Introduction to Management Accounting. Pearson Education. Moles, P., & Et. Al., (2011)....
7 Pages(1750 words)Essay
Principles of Finance
...presented by Modigliani and Miller is the cornerstone of capital structure in today’s world. The crux of the theory is that under an effective market where there are no taxes, insolvency costs, agency costs, and asymmetric information, the value of a business is not established by sources of finance (Modigliani and Miller). They advocated that under perfect market condition, without any friction, the capital structure of the company does not influence its market value. Therefore, it is irrelevant whether an entity finances its capital by issuing shares or raising debt and the like ways. Similarly, an entity’s dividend policy is immaterial. Owing to these factors, this thermo is also termed as capital...
8 Pages(2000 words)Essay
Principles of finance
...? Principles of Finance Principles of Finance “In a world with corporate taxes, Modigliani and Miller’s view is that a company should issue as much debt as possible. Why is this advice not followed by companies?”A debt is often an obligation owed by a debtor to a creditor, who is usually the second party. In this case, the debtor is the companies in question. In most cases, this is termed as assets granted, particularly by the creditor to the debtor. The debtor agrees to repay the debt with an interest. Some companies use debt as part of their strategy in corporate finance. Before the debt is issued, both parties have to agree on the standard of deferred...
6 Pages(1500 words)Essay
Principles of Finance
...is changed (Keown, Martin, & Petty, 2011). As the value of input variables change, it would influence the values of profits and thus it would influence the profits of the company and therefore would influence the resulting values or the output values. References Gitman, L. (2003). Principles of Managerial Finance. Boston: Addison-Wesley Publishing. Keown, A., Martin, J., & Petty, J. (2011). Foundations of finance (7th ed.). Boston, MA: Prentice Hall Khan, M. (1993). Theory & Problems in Financial Management. Boston: McGraw Hill Higher Education. Lohmanna, J., & Bakshb, S. (1993). The IRR,NPV And Payback Period And Their Relative Performance In Common Capitial Budgeting Decision...
6 Pages(1500 words)Essay
Principles of Finance 1
...? Principles of Finance Principles of Finance The principles of finance include valuation principles, risk management, finance and investment principles. An understanding of these principles will provide the financial manager with the analytical tools necessary in the decision-making process in solving financial problems. The resources of firms are scarce; thus, investment decisions should be made wisely. Market prices are essential components of a financial manager in his decision-making process. Prices of goods and services are necessary inputs in almost all cost-benefit analysis that are undertaken by the company. The risk and return of the proposed investment project requires a study of the project’s cash flows. To analyze... of the...
2 Pages(500 words)Term Paper
Principles of Finance Paper
...? Principles of Finance Introduction Certain fundamental principles recur in the conduct of commerce since the beginning of time. Emery, Finnerty & Stowe refer to them as the major principles of finance (Emery, Finnerty and Stowe, 2007). They provide three major categories with four minor subdivisions: competitive financial environment, value and economic efficiency and financial transactions. These principles are observable in any given business situation. The company chosen to demonstrate these principles in action is B.P. BP is a public limited company that provides a variety of energy-related goods and services. As an international leader in oil and gas exploration and provision, BP’s business practices offer great insight... into...
4 Pages(1000 words)Assignment
Principles of Finance
...__________________ Principles of Finance John and Johnson Case Analysis by ______________Year College ___________________ Student ____________, 2006 Table of Contents Title Page Abstract Introduction Answer Annotated Bibliography Appendix JOHNSON AND JOHNSON Abstract There are many tools used analyzing bond issues. One issue is the Annual Percentage Rate. The Computation below shows that issue 7.375s19 generated the highest Annual Percentage Rate of 14.75%. This is very much higher than the annual percentage rate of issue...
20 Pages(5000 words)Essay
Principles of Finance Essay
...Page Principles of Finance Contents Page Page i Contents Page ii Q1: Financing in Three Continents Q4: Lessons Learned 5 Q5: CFOs and the Corporate Mission 5 Table 1: Total Equity and Debt Issues (2001-2006) 7 Figure 1: Selected Indictors on Capital Markets (2005) 8 Figure 2: Sectoral Balance Sheets for U.S., Japan, & Europe 9 Figure 3: Equity Markets Indices (1990-2006) 10 Figure 4: Volatility History in Equity Markets 11 Figure 5: Historical Volatility of Bond Yields and Returns 12 Works Cited 13 Q1: Financing in Three Continents Table 1 shows the amounts raised by issues of stocks and bonds from 2001 to 2006 in the U.S., the U.K., and in Japan. The figures were...
4 Pages(1000 words)Essay
Principles of Finance
...Question 4) (a) Expected Return on Stock A = Expected Return on Stock B = = Standard Deviation of Stock A: Standard Deviation of Stock B: (b) (i) Expected Return on the portfolio = Expected Standard Deviation of the portfolio Deriving the equation between risk and return Standard Deviation of a portfolio with an expected return of 7% Standard Deviation of a portfolio with an expected return of 15% (ii) Expected Return on the portfolio = Expected Standard Deviation of the portfolio Deriving the equation between risk and return Standard Deviation of a portfolio with an expected return of 7% Standard Deviation of a portfolio with an expected return of 15% (iii) I will select the portfolio which provides me a greater level of return...
3 Pages(750 words)Speech or Presentation
PRINCIPLES OF FINANCE
...Capital Budgeting Working Computers Net Cash Flow Per Year- Table 03 04 05 06 07 08 09 Annual sales74,250,000 93,555,000 121,770,000 130,680,000 130,680,000 130,680,000 Cogs 44,550,000 56,133,000 73,062,000 78,408,000 78,408,000 78,408,000 Expenses 17,820,000 22,453,200 29,224,800 31,363,200 31,363,200 31,363,200 Depreciation 3,920,000 3,920,000 3,920,000 3,920,000 3,360,000 1,680,000 Income before taxes 7,960,000 11,048,800 15,563,200 16,988,800 17,548,800 19,228,800 Income tax at marginal rate (34%) 2,706,400 3,756,592 5,291,488 5,776,192 5,966,592 6,537,792 Net income 5,253,600 7,292,208 10,271,712 11,212,608 11,582,208 12,691,008 Net annual cash flow 9,173,600 11,212,208 14,191,712 15,132,608 14,942,208 14,371,008 Working... Budgeting...
6 Pages(1500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Let us find you another Essay on topic Principles of Finance for FREE!
Contact Us