Corporate Finance - 4881 Words

Table of Content Executive Summary 3 1. Introduction 4 1.1 Overview of Harvey Norman Holding Limited 4 1.2 Major Competitor 5 1.2.1 JB Hi-Fi 5 1.2.2 Woolworth 5 2. Capital Structures 6 2.1 Types of Funding 6 2.2 Recent Trends of Leverage 7 2.3 Comparison of capital structure with similar companies 9 2.4 Capital expenditures and its financing 10 2.5 Important factors influencing the use of debt financing 10 2.5.1 Tax Advantage 10 2.5.2 Corporate Tax Rate 11 2.5.3 Credit rating 11 2.5.4 Interest rate 11 2.5.5 Company’s Industry 12 2.5.6 Company’s growth rate 12 2.5.7 Some other arguments about Harvey Norman 12 2.6 Evidence of financial†¦show more content†¦HVN appropriate share price is $4.23 which is $0.12 higher than the actual closing price of $4.11. It is recommended for the investor to purchase more of the company’s share as it was undervalued. The sensitivity analysis shows the theoretical share price is very sensitive to change in WACC. Careful and continuous observation might be needed to constantly monitor the factors that can alter the WACC such as market return, the company’s beta, risk free rate , and tax rate. D/E ratio can also alter the WACC due to tax benefit on debt. This implies we should keep checking changes of the company’s capital structure, namely its financing decisions and activities because they are important factors to create value of the company. 1. Introduction 1.1 Overview of Harvey Norman Holding Limited Harvey Norman Holdings Ltd is a public company whose principal activities consist of an integrated franchising, retail, and property entity. As a franchisor it give franchises to independent business operator and as business owners HVN provide retail product for home and office with different range of categories such as electrical, computers and communications, small appliances, furniture, bedding and Manchester, home improvements, lighting, carpet, and flooring. HVN started it business since October 1982 with only one store. For the past 26 years they are experiencing massive growth. As at 7 Oct 2008, there were 192 franchised complexes aroundShow MoreRelatedCorporate Finance Notes1881 Words   |  8 PagesStudy notes By Zhipeng Yan Corporate Finance Stephen A. Ross, Randolph W. Westerfield, Jeffrey Jaffe Chapter 1 Introduction to Corporate Finance ..................................................................... 2 Chapter 2 Accounting Statements and Cash Flow.............................................................. 3 Chapter 3 Financial Markets and NPV: First Principles of Finance................................... 6 Chapter 4 Net Present Value....................................Read MoreNotes for Corporate Finance2082 Words   |  9 PagesCorporate Finance Notes * Chapter One: Introduce to Corporate Finance 1. Three Questions: A. What Long-term asset should be invested? Capital Budgeting B. How to raise cash for capital expenditures? Capital Structure C. How to manage short-term cash flow? Net Working Capital 2. Capital Structure: Marketing Value of Firm = MV of Debt + MV of Equity 3. Finance perspect and Accountant perspect: Finance: Cash Flow ! Accountant: A/R means profit ! 4. Sole proprietorshipRead MoreCorporate Finance69408 Words   |  278 PagesCorporate finance P. Frantz, R. Payne, J. Favilukis FN3092, 2790092 2011 Undergraduate study in Economics, Management, Finance and the Social Sciences This subject guide is for a Level 3 course (also known as a ‘300 course’) offered as part of the University of London International Programmes in Economics, Management, Finance and the Social Sciences. This is equivalent to Level 6 within the Framework for Higher Education Qualifications in England, Wales and Northern Ireland (FHEQ). For moreRead MoreCorporate Finance1421 Words   |  6 Pagesoperating earnings of the firm. The capitalization is to be made at a rate appropriate to the risk class of the firm. Growth Plans, are involved in capital structural theories in which a certain amount will be allocated for the growth plans. A finance manager should draw a plan according for the dividend policy. For Example: The firm has $10 million as equity capital and $6 million as debt capital and the firm made a profit (after tax) of $2 million, and the fund allocated to the growth plan wasRead MoreCorporate Finance - Concept Questions12247 Words   |  49 Pagesquestions of corporate finance? a. Investment decision (capital budgeting): What long-term investment strategy should a firm adopt? b. Financing decision (capital structure): How much cash must be raised for the required investments? c. Short-term finance decision (working capital): How much short-term cash flow does company need to pay its bills. ( Describe capital structure. Capital structure is the mix of different securities used to finance a firms investmentsRead MoreFundamentals of Corporate Finance 9e82683 Words   |  331 Pageshttp://helpyoustudy.info Chapter 01 - Introduction to Corporate Finance Chapter 01 Introduction to Corporate Finance Answer Key Multiple Choice Questions 1. Which one of the following terms is defined as the management of a firm s long-term investments? A. working capital management B. financial allocation C. agency cost analysis D. capital budgeting E. capital structure Refer to section 1.1 AACSB: N/A Difficulty: Basic Learning Objective: 1-1 Section: 1.1 Topic: Capital budgeting Read MoreCorporate Business Finance 7343 Words   |  30 PagesCorporate Business Finance Seminar 5 Project Finance Lauren Leigh Essaram 207507339 Ruvimbo Mukorera 206525531 27 September 2010 Submitted in partial fulfilment of the duly performed requirement of International Business Finance, School of Economics and Finance, University of KwaZulu-Natal Abstract Non-recourse financing has grown in popularity, especially in developing countries. It has done so more specifically in the basic infrastructure, natural resources and also in the energyRead MoreAdvanced Corporate Finance4303 Words   |  18 PagesUniversity of Puget Sound School of Business and Leadership BUS 434 Advanced Corporate Finance Professor Alva Wright Butcher Tues-Thurs 11:00-12:20 McIntyre 107 Spring Semester 2012 Office: McIntyre 111 I Phone: 253-879-3349 FAX: 253-879-3156 Office Hours: T-Th: 1:00-1:50 Wed: 9:30-10:30 And by appointment Note that I am always willing to schedule additional office hours by appointment. I check email frequently, so that is also a goodRead MoreEssay Corporate Finance1613 Words   |  7 Pages Why is corporate finance important to all managers? Corporate finance is a specific area of finance dealing with the financial decisions corporations make and the tools as well as analyses used to make these decisions. The primary goal of corporate finance is to enhance corporate value, without taking excessive financial risks. A corporations managements primary responsibility is to maximize the shareholders wealth which translates to stock price maximization. Corporate finance providesRead MoreCorporate Finance Essay1150 Words   |  5 PagesCorporate Finance Essay Most corporate financing decisions in practice reduce to a choice between debt and equity. The finance manager wishing to fund a new project, but reluctant to cut dividends or to make a rights issue, which leads to the decision of borrowing options. The issue with regards to shareholder objectives being met by the management in making financing decisions has come to become a major issue of recent times. This relates to understanding the concept of the agency problem. It deals

A Brief Note On Journalism And Its Effects On Journalism

Raveena Singh CS 4001 4-25-2016 Automating Journalism Journalism should be as automated as possible and the production of tools to help journalists supplement their articles should be encouraged. For data-intensive fields, more algorithms with the ability to report news without human intervention should be generated. Although there is a fear that these new technologies will have harmful effects on journalism, collaboration between the technology and journalism industries will benefit the future of journalism. New technology will lead to cheaper production costs in the long run, greater content coverage, and overall higher-quality content. Journalism has changed over time with the help of technology. The tools that journalists use to create†¦show more content†¦These tools include: Google Glass, Columbia Daily Tribune maps, metro maps, and algorithms. These tools have saved time, money, and resources compared to traditional journalistic methods. In the past, working for the newspaper meant discovering a good story, conducting interviews and research, and submitting stories on time. These elements stay at the core, but new elements have been added. Now, it is standard to generate video and audio alongside text, including an email address, and using web tools to add depth and richness to articles. It is also important to get information to readers as fast as possible on any platform they use (Regan, 2000). Technology will change the future of the way journalism is conducted. Just as phones gave reporters the ability to stay on the scene of a story longer, TV gave the ability to tell news stories with moving images. New media is already changing how journalists do their job, whether they welcome the changes or not. Producing this supplementary material will be a part of every reporter’s job description. The heart of good journalism, storytelling, will remain a priority, but the tools used will certainly change (Regan, 2000). Technology has changed the newspaper media industry in terms of how we read and report news. A reporter arriving to a scene with a pen and paper is an iconic image, but to be a successful journalist in the modern world

Exchange Rate Movements And The Australian -Myassignmenthelp.Com

Question: Discuss About The Exchange Rate Movements And The Australian? Answer: Introduction The present report highlights on the case study focusing on the Australian dollar sliding back to 70 US cents. Based on this case study, the following questions are answered. The first questions reflect on the determination of AUD exchange rate in the Forex market using the demand and supply framework. The second question analyzes the movement of AUD in relation to that of USD. The third question discusses about the driving forces that affect the AUD/USD exchange rate. The fourth question elucidates on the influence of depreciation of Australian dollar on the firm. The last question focuses on the actions taken by the Reserve Bank of Australia for bringing the exchange rate back to US 80C AUD. Exchange rate refers to a specific nation currency in terms of foreign currency. The demand supply framework of determination of exchange rate indicates that equilibrium exchange rate varies when some of the factors that impact demand as well as supply condition varies. Unlike determination of price as well as quantity, the demand-supply model basically guides authorities to forecast this exchange rate in the next period. In addition, it also aids to trace different causes that impact the exchange rate of the nation and thereby directs policymakers to measure the condition effectively. The determination of exchange rate of AUD in the forex market has been described below. The figure below represents the demand- supply model of the foreign exchange market in which the demand of currencies has been attained through demand of export of the nation while the supply has been determined through demand of its imports (Amiti, Itskhok and Konings 2014, p.1970). The demand curve (DD) is drawn based on the derived demand whereas the supply curve (SS) is drawn based on aggregate import goods demand. It has been assumed that the equilibrium occurs at the point E* in which the exchange rate for per unit AUD is 80C USD. However, at this point, the demand for the import goods in the Australian market is depicted by Q. Now, if the demand for AUD increases from Q0 to Q1, the foreign exchange demand will shift in the rightward direction from DD to DD1. This leads to increase in exchange rate to 81C for per unit of AUD. On the contrary, if the demand of AUD decreases, the demand curve shifts to leftward direction from DD to DD2. This in turn leads to decline in exchange r ate to 77C USD per unit of AUD from 80C USD per unit of AUD. The above diagram of the demand-supply model of the exchange rate of Australia reflects that the market system is flexible (Mancini, Ranaldo and Wrampelmeyer 2013, p. 1840) There are several factors that lead to fluctuation of demand as well as supply of AUD, which are explained below: Rate of inflation- Low rate of inflation will exhibit increasing AUD value leading to rightward shift of demand curve. On the other hand, higher inflation rate leads to depreciation of AUD that shifts the demand curve to right. Current Account of nation- Australias current account includes exports, debt, imports and so on. Deficit in Australias current account owing to high spending in currency on import goods than total earnings from export goods sale leads to depreciation. This in turn shifts the demand curve to right. Interest rate-Rise in rate of interest leads to appreciation of the AUD owing to increase in demand of export of the products and services. Plans of government- The government of Australia increases the demand of its currency in the foreign market with increase in import substitution as well as export promotion. This in turn leads to increase in the nations exchange rate. Trade weighted Index (TWI) refers to multilateral exchange rate, which is complied as weighted average of domestic exchange rates with respect to foreign currencies. It is mainly used as an economic indicator in order o compare exchange rate of the nation against their main trading partner. In addition, it is highly useful between the Australian dollar and US dollar for estimating changes in competitiveness owing to movements in exchange rate (Burstein and Gopinath 2014, p.395). On the other hand, nominal exchange rate refers to the total number of unit of domestic currency, which can purchase foreign currency unit. However, decline in this variable refers to nominal appreciation of currency while increase in this variable refers to as nominal depreciation of currency. For over the past three years, there have been several fluctuations in nominal exchange rate of Australia and TWI. From the figure below, it can be seen that in the year 2015, there was several fluctuations and thus reflects that the nominal exchange rate of Australias currency was at peak at March (Lustig, Stathopoulos and Verdelhan 2016). Furthermore, during this period, the nominal exchange rate declined to lowest point owing to decline in demand for products and services in Australia. This in turn increases the cost of USD as compared to AUD. During the month of July 2017, it rose at high rate but declined again from October of the recession in the US market. But in the year 2017, the TWI value recorded the highest. Therefore, TWI fluctuated during the last three years based on the trade magnitude between US and Australia. In addition, weak US dollar has been one of the major factors of behavior of AUD. As the US market had become saturated over the years, it lead to recession in the year 2015, which in turn resulted into decrease in demand of products and services of Australia in US market (Sloman, Norris and Garrett 2013). Hence, since the year 2017, the demand for products and services and rate of interest in Australia increases, which in turn lead to increase in AUD demand. However, from the above two figures, it can be seen that there has been increasing trend, which signifies that there will be better business between US and Australia in future. The given article reflects that there have been several reasons for the current fluctuation in AUD as compared to USD. The study also highlights that the major reason behind increase in AUD in respect of USD is increasing price of goods and droop in export of USD. However, this has increased the export of Australia leading to increase in AUD demand (Manalo, Perera, and Rees 2015, p.60). As a result, there has been appreciation of AUD in comparison with USD. In fact, the strength of AUD is not highly sustainable due to rigid wages as well as inflation rate of this nation. Furthermore, some threats also occurs such as decrease in iron ore price in global market, decrease in Chinese economys growth and increasing gap between Australia and US. In addition, it has been predicted that the AUD will again decline to 70 C USD when the interest rate of US begins to surpass interest rate of Australia and export with US declines. The figure below portrays variation in Australian exchange rate with the help of demand and supply (Frenkel and Johnson 2013). Increase in export of iron ore as well as US exchange rate slump leads to rise in exchange rate from Ex to Ex1 as AUD faced rise in demand. Therefore, if the gap in rate of interest increases between US and Australia and declining price of iron ore is considered, then demand will decline to D2. However, new equilibrium occurs at E2 in which the exchange rate is Ex2. Imports will become highly expensive with the depreciation of AUD, which again might lead to lower demand of import goods. However, with less importable demand, the enterprise will increase commodity price for making profit. This increase in price of goods leads to decline in demand for product, which again leads to increase in price (Gabaix and Maggiori 2015, p. 1375). This cycle continues until equilibrium quantity as well as price is attained. In addition, low AUD value in respect of USD, the importer of electric machinery might face huge loss owing to reduction in importable demand. On the contrary, depreciation will also lead to increase in export as the exported goods become cheaper with decline in AUD/USD exchange rate. This in turn will increase the BOP (Balance of Payment) and increase in economic growth. Moreover, deficit in current account with also increase with AUD depreciation as compared to USD. Hence, the terms of trade between US will enhance with decrease in exchang e rate. Considering the overall Australian economy, the exporters of the products are the main ones who enjoy the benefits of lower Australian dollar (Berman, Martin and Mayer 2012, p.449) However, the local business might find competitive edge over the import goods, which in turn generally becomes highly expensive. By taking into account the given situation, it can be said that there are several instruments that the government of Australia might enter the exchange rate in order to gain appreciation. From the newspaper report, it can be seen that exchange rate of Australian dollar has been declining owing to decline in iron ore demand from Australia (Chowdhury 2012, p. 345). In addition, the government of this nation can take plans regarding export promotion by focusing on the US market that in turn might enhance the demand of mining products in Australia. This in turn might lead to increase in AUD demand in the foreign nations. However, this might appreciate AUD in comparison with USD. The given article also highlights that there has been increasing gap of rate in interest between Australia and US owing to increase in the Federal rate. Suppose if the gap increases hugely, then it is expected some of the international investors will make investment in the US economy instead of making it in Austr alian economy (Ismail 2018). This in turn might lead to decline in exchange rate of AUD and increase in exchange rate in USD. In order to bring back the exchange rate, the Reserve Bank of Australia should take some actions. The Australian economy is slowing down owing to sluggish wage rate and inflation rate. For overcoming this condition, the Reserve Bank of Australia should increase their rate of interest and must also take program regarding fiscal expansion from the accumulated fund (Taussig 2013). As a result, this will help to enhance the economic growth by overcoming this condition. Furthermore, the Australian government should also adopt import substitution method as well as quota system for stopping the deficit of net export. Although these plans might help to bring back the exchange rate of AUD from 72C to 80C USD for AUD, this might create adverse impact. For example, implementing import quota system might not be possible in AUSFTA pact between the nations. Additionally, i ncrease in export promotion leads to appreciation in AUD, which again leads to increase in imports (Rios, McConnell and Brue 2013). Apart from this, domestic investment might increase if the government increases rate of interest and thus demand might fall owing to deficiency in liquidity in market. Thus, Australia might bring back exchange rate to 80C USD per unit AUD with this above given plan. Moreover, the government should increase the development of infrastructure, then it be might be beneficial for the nation for increasing the exchange rate. Conclusion From the above report, it can be concluded that exchange rate fluctuates due to several activities in the economy. The demand-supply framework of the Australias exchange rate reflects that its market system is flexible. The TWD data also highlights that there has been fluctuations in AUD relative to that USD for the last few years. Increase in export of iron ore as well as US exchange rate and rise in product price are the main drivers that affect AUD/USD. The depreciation of Australian dollar has positive influence on the organization and thus local business benefits from this. In addition, the actions that Reserve Bank of Australia will take for bringing back exchange rate are- increasing rate of interest, reduction of wage rate and keeps inflation rate low. References Amiti, M., Itskhoki, O. and Konings, J., 2014. Importers, exporters, and exchange rate disconnect.American Economic Review,104(7), pp.1942-78. Berman, N., Martin, P. and Mayer, T., 2012. How do different exporters react to exchange rate changes?.The Quarterly Journal of Economics,127(1), pp.437-492. Bramble, T., 2015. The Australian economy after the mining boom.Red Flag. Burstein, A. and Gopinath, G., 2014. International prices and exchange rates. InHandbook of International Economics(Vol. 4, pp. 391-451). Elsevier. Chinn, M.D. and Wei, S.J., 2013. A faith-based initiative meets the evidence: does a flexible exchange rate regime really facilitate current account adjustment?.Review of Economics and Statistics,95(1), pp.168-184. Chowdhury, K., 2012. Modelling the dynamics, structural breaks and the determinants of the real exchange rate of Australia.Journal of International Financial Markets, Institutions and Money,22(2), pp.343-358. Frenkel, J.A. and Johnson, H.G. eds., 2013.The Economics of Exchange Rates (Collected Works of Harry Johnson): Selected Studies(Vol. 8). Routledge. Gabaix, X. and Maggiori, M., 2015. International liquidity and exchange rate dynamics.The Quarterly Journal of Economics,130(3), pp.1369-1420. Gallo, C. and Fratello, A., 2014. The Forex market in practice: a computing approach for automated trading strategies.International Journal of Economics and Management Sciences (IJEMS),3(2). Ismail, N. (Conclusiontipped-to-slide-back-to-70-us-cents-20180129-h0pp8v.html [Accessed 16 Mar. 2018]. Lustig, H., Stathopoulos, A. and Verdelhan, A., 2016. Nominal exchange rate stationarity and long-term bond returns.Available at SSRN Manalo, J., Perera, D. and Rees, D.M., 2015. Exchange rate movements and the Australian economy.Economic Modelling,47, pp.53-62. Mancini, L., Ranaldo, A. and Wrampelmeyer, J., 2013. Liquidity in the foreign exchange market: Measurement, commonality, and risk premiums.The Journal of Finance,68(5), pp.1805-1841. Rios, M.C., McConnell, C.R. and Brue, S.L., 2013.Economics: Principles, problems, and policies. McGraw-Hill. Sloman, J., Norris, K. and Garrett, D., 2013.Principles of economics. Pearson Higher Education AU. Taussig, F.W., 2013.Principles of economics(Vol. 2). Cosimo, Inc..