Questions tagged [corporate-finance]
The corporate-finance tag has no usage guidance.
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Shouldn't corporate tax be calculated based on EBIT instead of EBT?
When I was studying Corporate Finance in university, I was surprised to learn that it is more advantageous for corporations to take more debt (even if they don't need to) because it creates tax shield ...
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1answer
52 views
Bankruptcy Vs default
If a company files for bankruptcy, how come its stock still trades ?
E.g. On June 17, Wirecard was valued at more than $14 billion. Eight days later, it filed for the German equivalent of bankruptcy. ...
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1answer
47 views
Would the market stabilize if companies paid taxes on revenue instead of gross income?
Note: there is a closed question that is similar (https://money.stackexchange.com/questions/126677/paying-taxes-revenue-vs-taxes-profit) but the response offers a perspective that I would like to ...
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1answer
23 views
Why might it make sense to buy bonds in a company facing restructuring?
In this video, Sal Khan states, "If you really thought that Lehman Brothers in the long term was going to come back, what you might want to do is somehow try to become one of its bondholders, and ...
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1answer
31 views
Where to learn financial modelling concepts and skills?
I'm looking to learn more about the financial analysis of a business. Things like unit economics calculation, income statement, free cash flow analysis, a valuation calculation, etc.
Can you recommend ...
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0answers
15 views
Is the Philanthropic CSR model designed to make maximum returns from philanthropy, and turn philanthropy in to a business strategy?
Corporate social responsibility
Corporate social responsibility (CSR) is a type of international private business self-regulation1 that aims to contribute to societal goals of a philanthropic, ...
1
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1answer
75 views
Does development aid, negatively effect the development of developing countries?
Development aid
Development aid or development cooperation (also development assistance, technical assistance, international aid, overseas aid, official development assistance (ODA), or foreign aid) ...
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2answers
61 views
Why is the ECB asking EU banks to hold off on buybacks?
In the wake of the Covid-19 pandemic, the ECB requested EU banks not to pay dividends as well as refraining from buying back their own shares until the end of 2020. And that even if they had already ...
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1answer
20 views
Why is a company allowed to change the number of shares it’s divided into after its IPO?
I read that even after an IPO, a company can change the number of shares that it’s divided into based on a board vote. What’s to prevent them from arbitrarily increasing the number of shares to raise ...
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1answer
46 views
What does Eugene Fama mean “the amount of debt that's financed with equity isn't put aside”?
I transcribed A Symposium with 2013 American Nobel Laureates at Embassy of Sweden, Washington - YouTube starting at 56:00.
The moderator, AAAS CEO Alan Leshner, claims
Locking up that kind of money ...
2
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1answer
47 views
Why is it relevant for a company to use dividends to incentivize shareholders to maintain ownership of the company's stocks?
I was reading the definition of "Bottom Line" on Investopedia and one of the reasons companies increase their bottom-line is to issue payments (dividends) to stockholders as an incentive to ...
2
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1answer
48 views
Who holds the Reverse Repo and Repo respectively in a Repurchase Agreement?
According to investopedia.com in this definition
A reverse repurchase agreement, or "reverse repo", is the purchase of
securities with the agreement to sell ...
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1answer
54 views
Risk neutral probability for each of 3 states
I need help to find the risk-neutral probability for states 1,2 and 3
I have two stocks: A and B.
The price of A today is 180 and in a year it will be worth 288 (S1), 180 (S2) or 120 (S3);
The ...
1
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1answer
160 views
Economic Profit and the Return on Invested Capital
In my finance classes, I always learned that the a firm earning an "economic profit" is one for which its return on invested capital (ROIC) is greater than it's opportunity cost of capital (usually ...
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1answer
45 views
Financial Economics and Corporate Finance
In pg 4 of Principles of Corporate finance (Allen et al, 2017), in the context of explaining financing decisions are less important that investment decisions, there is a line that says:
"Financial ...
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0answers
47 views
Why was the Glass-Steagall Legislation enacted?
I realize that the part of the reason the Glass-Steagall act was enacted was to ensure that banks do not invest customer's deposits into risky securities, but what was the rationale for separating ...
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25 views
Best way to measure company size relative to world GDP
I'm working o a model where corporate revenue / world GDP is a dependent variable of some stuff (based on the model proposed in this paper: http://www.scielo.br/scielo.php?pid=S1807-76922009000200002&...
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2answers
136 views
Corporate Finance Book Recommendations
Can you share your recommendations for corporate finance if you have any?
A slightly more detailed version would be better:
For example, something like:
Advanced Undergrad: Varian's $\textit{...
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1answer
365 views
How to calculate capital investment?
So i have this question:
After spending 3 million on research, Better Mousetraps has developed a new trap. The project requires an initial investment in plant and equipment of 6 million. This ...
0
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1answer
260 views
Interpeting equivalent annual cash flows
So i have this question:
RainMan Inc. is in the business of producing rain upon request. They must decide between two investment projects; a new airplane for seeding rain clouds or a new weather ...
0
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1answer
17 views
Relevance of change in Inventory in calculation of Free Cash Flow
Free cash flow (FCF) can be obtained by
$$
\text{FCF}=(\text{Revenues}-\text{Cost}-\text{Depreciation})(1-\tau)+\text{Depreciation}-\text{Capital Expenditures}-\Delta(\text{Net Working Capital})
$$
...
3
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2answers
220 views
Does commercial paper usually carry a higher yield than corporate bonds? Why?
In Banking: A Very Short Introduction, Goddard and Wilson write:
[Commercial paper] usually carries a higher yield than corporate bonds.
But aren't corporate bonds longer term than commercial ...
3
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1answer
42 views
Can corporate tax loss carryforward function like a sort of insurance policy?
I'm a graduate student in mathematics, with a casual knowledge of economics, so please let me know if this question is a non-sequitur or off base.
Here's the intuition I'm trying to capture: Suppose ...
0
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1answer
52 views
How can a company run out of cash when its stock prices is dropping?
For instance, in 2008, the Royal Bank of Scotland saw its stock price drop by ~30% in a day, and it was apparently impossible for the bank to make it till the end of the day because it would run out ...
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1answer
48 views
Black-Scholes Model question
Suppose a company has a zero coupon bond with face value of 200 million which matures in a year. Its assets has a market value of 300 million. The standard deviation is 30% and the risk free rate is ...
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1answer
63 views
0
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1answer
61 views
Present Value Analysis
For my exmaple, we have machine A with an initial cost of 15K and O&M of 2k per year for the next 4 years. After 4 years, the O&M rise to $2.7k per year. No salvage value and life span of 20 ...
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4answers
93 views
How should I evaluate my startup?(specific question)
If I have a startup that produces a product that I estimate to sell 100/per month, with 50%profit, and $200 is the customer price of each product, How can I evaluate this business to find investors?
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1answer
34 views
If I have a £25,000 loan, in a balance sheet do I include it in the Cash as well as a liability? [closed]
I'm new to all this and balance sheets are extremely confusing.
In this example I've received a £25,000 loan from the bank, it has a fixed interest rate of 6% to be paid over 1-5 years.
This is the ...
3
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2answers
73 views
Where are bank loans in balance sheet?
I am looking at the balance sheet of Coca-Cola (https://www.marketwatch.com/investing/stock/coke/financials/balance-sheet), but I cannot guess where loans with banks are. These liabilities accounts ...
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0answers
23 views
Best texts on cash usage and share buybacks in companies
What would be a good reference for how companies utilise their cash to conduct share buybacks. I am trying to understand how share buybacks affect the valuation of a company.
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0answers
60 views
Why are share repurchases particularly accretive?
From the "Manual of Ideas"...
VALUE CREATION VIA BUYBACKS Share repurchases tend to be particularly accretive in the case of companies generating cash from operations while trading below tangible ...
0
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3answers
198 views
CAPM goodness of fit
I want to test the CAPM. I have collected monthly data from 1-9-2012 to 1-9-2017. I have data from the return of Standard&Poor's 500 and data from various US companies. The beta's seem right, but ...
2
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1answer
549 views
Adding a non-binding constraint to the objective function
I am dealing with a constrained optimization problem found in Tirole's Theory of corporate finance. My question is not related to the details of this model, but just to provide some context, we are ...
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0answers
28 views
Corporate use of offshore cash
Recently Microsoft floated a \$17 billion bond to finance the purchase of LinkedIn (remind me to delete my account).
Some might wonder why a company with nearly \$100 billion in cash would need to ...
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0answers
63 views
Confusion about Balance sheet equation and sum of the cashflows
I was solving a business case I had at school where i just needed to compute the cashflows (CF). Once I have done so I wanted to check that my calculations are all good by verifying that the following ...
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1answer
55 views
Is corporate tax an argument in equal income tax (from labour and capital) debate and does the return on capital depend on rate of the corporate tax?
In our country we have 25% personal income tax on labour, 15% corporate tax on corporations and 10% personal income tax on income from capital (e.g. dividends). Pundits in our country are saying that ...
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1answer
89 views
Is the shareholder-creditor conflict the same as debt-equity conflict?
I am having some problems understanding the difference between shareholder-creditor conflict and debt-equity conflict.
I understand what the shareholder-creditor conflict is about, but when I try to ...
0
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1answer
25 views
Basel affecting the bank behaviour?
In EU, Banks have changed their behaviour lately, e.g. as acting liquidity providers to certain markets like notes etc.
Introduction of Basel III is probably one reason (tighter capital and ...
0
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1answer
67 views
Definition of market to book value?
What is the difference between (market value of equity/book value of equity) ratio and (market value of assets/book value of assets) ratio?
In my opinion both measure fairly the same? Is this correct?...
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2answers
44 views
What happens to a company whose share price goes down to very little over dividend loss?
This is a bit of an edge case scenario.
Let's say you have a company that is very profitable (and pays very high dividends off the profit) but has little/no growth potential.
The company decides to ...
3
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0answers
74 views
If the company were to buy back all their shares, does that mean the company would own itself? [closed]
If a publicly traded company buys back all it's shares from the public, majority holder and every last person that owns it's shares who would own the company? Obviously, it wouldn't be a normal ...
2
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2answers
1k views
Why is LIFO allowed in accounting?
I was reading about inventory valuation and of course there is first-in - first-out, last-in - first-out and weighted average. I realized at some point that LIFO would cause the highest Cost Of Goods ...
2
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1answer
225 views
Original data Altman used for his z-score formula
At our university we are researching the usefulness of failing (bankrupticy) prediction models. We are interested in the original datasets Altman used for his models. Does anyone know where this ...
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3answers
3k views
How are shell companies used for tax evasion?
The recent release of leaked documents on Mossack Fonseca has information on corporations and individuals using the firm's services for, among other things, tax evasion:
The massive security breach ...
5
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2answers
276 views
Foundational equations or concepts of Finance
For the other sciences it´s easy to point to the most important equations, inequalities, propositions or concepts that ground the discipline. If I want to explain Finance to a physicist say, what are ...
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0answers
60 views
Stiglitz 1976 on irrelevance of corporate financial policy
In this paper, Stiglitz gives a verbal argument as follows:
Let us consider verbally what actions of the individuals are required to offset various actions by the firm. Assume the ...
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2answers
48 views
Why do businesses care about rate(s) of change?
I'd like to introduce math-students to the concept of average and instantaneous rate of change, in order to get them interested in the topic.
I found the following example:
Based on data from 1990 ...
2
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1answer
83 views
Academic paper which justifies why companies are run better privately
A few years ago I was reading The Economist and I remember it stated a particular academic paper that underpinned the rationale for the existence of private equity firms. I have tried to find this ...
2
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2answers
190 views
How come websites such as Khan Academy and Anatomy Zone do not charge for their services?
I've noticed that most educational websites do not charge for their services, even if they are maintained by only one or very few people.
Some of these websites are so comprehensive that they require ...
