Assignement
- Part A stockholder value maximisation.
- shareholder value
- adv and disadv.
- pike and neal links to strategies apply the theory unfavorable judgment it
Part B have they delivered shareholder value all over the past 5 years - TSR total shareholder establish for every year
- EVA economic value added - need represent of equity (calculate using the dividend growth model)
Lecture
A company-s goal to maximise shareholder value needs to choose the right take tos
Advantages and disadv
- PI cyberspaceability index discounting the cash flows and addind them up then dividing by the initial enthronement
Is not too different from NPV.
If the company is limitless we undertake both projects if we need to choose we choose important because it has a higher PI. use the NPV in this case to vitiate making a wrong finish.
PI is an easier rule to use. If capital is rationed (not enough money to undertake the projects ) accept the project with the highest PI.
In an efficient capital market, the money goes to the projects with high PI. yet the markets are not efficient.
Its not the best decision to undertake all the good projects we can on that point magnate be limitations in the management or other restrictions.
If there is an internal constraint we should check the reasons, if its external there is nought to be done just 2 projects chosen from 3.
clear up profit = net income
Cash flow = Net profit + Depreciation
AAR = Average Annual profit / Average investment
Average investment = opening asset + closet asset / 2
If we relate to the equal of capital maybe we can assess the decision if its good though its not the best m value of money is one of the key things and also the detail that profit and cash are not the same.
The payback rule and discounted payback method.
-The faster you get the investment, the less risky it is.
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