CFAI 5 - Corporate Finance and Portfolio Managment Flashcards
Tipos de projetos: Replacement projects Expansion projects New products and services Regulatory, safety, and environmental projects Other.
- Replacement projects. These are among the easier capital budgeting decisions. If a piece of equipment breaks down or wears out, whether to replace it may not require careful analysis. If the expenditure is modest and if not investing has significant implications for production, operations, or sales, it would be a waste of resources to overanalyze the decision. Just make the replacement. Other replacement decisions involve replacing existing equipment with newer, more efficient equipment, or perhaps choosing one type of equipment over another. These replacement decisions are often amenable to very detailed analysis, and you might have a lot of confidence in the final decision.
- Expansion projects. Instead of merely maintaining a company’s existing business activities, expansion projects increase the size of the business. These expansion decisions may involve more uncertainties than replacement decisions, and these decisions will be more carefully considered.
- New products and services. These investments expose the company to even more uncertainties than expansion projects. These decisions are more complex and will involve more people in the decision-making process.
- Regulatory, safety, and environmental projects. These projects are frequently required by a governmental agency, an insurance company, or some other external party. They may generate no revenue and might not be undertaken by a company maximizing its own private interests. Often, the company will accept the required investment and continue to operate. Occasionally, however, the cost of the regulatory/safety/environmental project is sufficiently high that the company would do better to cease operating altogether or to shut down any part of the business that is related to the project.
- Other. The projects above are all susceptible to capital budgeting analysis, and they can be accepted or rejected using the net present value (NPV) or some other criterion. Some projects escape such analysis. These are either pet projects of someone in the company (such as the CEO buying a new aircraft) or so risky that they are difficult to analyze by the usual methods (such as some research and development decisions).
NPV
IRR
payback period
discounted payback period
Average Accounting Rate of Return
Profitability Index
NPV é os cash flow do investimento atualizados - o custo no presente
IRR é a taxa de desconto à qual se atualiza os cash flow do projeto que nos dá um valor do projeto igual ao seu custo. N
The payback period has many drawbacks—it is a measure of payback and not a measure of profitability. By itself, the payback period would be a dangerous criterion for evaluating capital projects. Its simplicity, however, is an advantage. The payback period is very easy to calculate and to explain. The payback period may also be used as an indicator of project liquidity. A project with a two-year payback may be more liquid than another project with a longer payback
igual ao anterior contudo os cf são atualizados
Averagenetincome / Averagebookvalue
The advantages of the AAR are that it is easy to understand and easy to calculate. The AAR has some important disadvantages, however. Unlike the other capital budgeting criteria discussed here, the AAR is based on accounting numbers and not based on cash flows. This is an important conceptual and practical limitation. The AAR also does not account for the time value of money, and there is no conceptually sound cutoff for the AAR that distinguishes between profitable and unprofitable investments. The AAR is frequently calculated in different ways, so the analyst should verify the formula behind any AAR numbers that are supplied by someone else. Analysts should know the AAR and its potential limitations in practice, but they should rely on more economically sound methods like the NPV and IRR.
The profitability index (PI) is the present value of a project’s future cash flows divided by the initial investment.
1+NPV / Initialinvestment
The Gerhardt Corporation investment (discussed earlier) had an outlay of €50 million, a present value of future cash flows of €63.136 million, and an NPV of €13.136 million. The profitability index is
1.26
.
NPV profile
É importante para comparar diferentes projetos de investimento. Reflete o NPV em função da discount rate usada.
Multiple IRR problem quando é que ocorre ou pode ocorrer?
For conventional projects that have outlays followed by inflows—negative cash flows followed by positive cash flows—the multiple IRR problem cannot occur. However, for nonconventional projects, as in the example above, the multiple IRR problem can occur
Freitag Corporation is investing €600 million in distribution facilities. The present value of the future after-tax cash flows is estimated to be €850 million. Freitag has 200 million outstanding shares with a current market price of €32.00 per share. This investment is new information, and it is independent of other expectations about the company. What should be the effect of the project on the value of the company and the stock price?
The NPV of the project is €850 million − €600 million = €250 million. The total market value of the company prior to the investment is €32.00 × 200 million shares = €6,400 million. The value of the company should increase by €250 million to €6,650 million. The price per share should increase by the NPV per share, or €250 million / 200 million shares = €1.25 per share. The share price should increase from €32.00 to €33.25.
An investment of $100 generates after-tax cash flows of $40 in Year 1, $80 in Year 2, and $120 in Year 3. The required rate of return is 20 percent. The net present value is closest to: A.$42.22. B.$58.33. C.$68.52. .
B is correct.
An investment of $150,000 is expected to generate an after-tax cash flow of $100,000 in one year and another $120,000 in two years. The cost of capital is 10 percent. What is the internal rate of return?
A.28.39 percent.
B.28.59 percent.
C.28.79 percent.
C is correct. The IRR can be found using a financial calculator or with trial and error. Using trial and error, the total PV is equal to zero if the discount rate is 28.79 percent.
•Kim Corporation is considering an investment of 750 million won with expected after-tax cash inflows of 175 million won per year for seven years. The required rate of return is 10 percent. Expressed in years, the project’s payback period and discounted payback period, respectively, are closest to:
A.4.3 years and 5.4 years.
B.4.3 years and 5.9 years.
C.4.8 years and 6.3 years.
B is correct.
•An investment of $20,000 will create a perpetual after-tax cash flow of $2,000. The required rate of return is 8 percent. What is the investment’s profitability index?
A.1.08.
B.1.16.
C.1.25.
C is correct.
Erin Chou is reviewing a profitable investment project that has a conventional cash flow pattern. If the cash flows for the project, initial outlay, and future after-tax cash flows all double, Chou would predict that the IRR would:
A.increase and the NPV would increase.
B.stay the same and the NPV would increase.
C.stay the same and the NPV would stay the same.
B is correct. The IRR would stay the same because both the initial outlay and the after-tax cash flows double, so that the return on each dollar invested remains the same. All of the cash flows and their present values double. The difference between total present value of the future cash flows and the initial outlay (the NPV) also doubles.
An investment has an outlay of 100 and after-tax cash flows of 40 annually for four years. A project enhancement increases the outlay by 15 and the annual after-tax cash flows by 5. As a result, the vertical intercept of the NPV profile of the enhanced project shifts:
A.up and the horizontal intercept shifts left.
B.up and the horizontal intercept shifts right.
C.down and the horizontal intercept shifts left.
A is correct. The vertical intercept changes from 60 to 65 (NPV when cost of capital is 0%), and the horizontal intercept (IRR, when NPV equals zero) changes from 21.86 percent to 20.68 percent.
Wilson Flannery is concerned that this project has multiple IRRs.
Year 0 1 2 3 Cash flows −50 100 0 −50
How many discount rates produce a zero NPV for this project?
A.One, a discount rate of 0 percent.
B.Two, discount rates of 0 percent and 32 percent.
C.Two, discount rates of 0 percent and 62 percent.
C is correct. Discount rates of 0 percent and approximately 61.8 percent both give a zero NPV.
With regard to the net present value (NPV) profiles of two projects, the crossover rate is best described as the discount rate at which:
A.two projects have the same NPV.
B.two projects have the same internal rate of return.
C.a project’s NPV changes from positive to negative.
A is correct. The crossover rate is the discount rate at which the NPV profiles for two projects cross; it is the only point where the NPVs of the projects are the same.
With regard to capital budgeting, an appropriate estimate of the incremental cash flows from a project is least likely to include:
A.externalities.
B.interest costs.
C.opportunity costs.
B is correct. Costs to finance the project are taken into account when the cash flows are discounted at the appropriate cost of capital; including interest costs in the cash flows would result in double-counting the cost of debt.
O custo de um projeto para uma empresa deve ser considerado o WACC? não há ajustamentos?
For an average-risk project, the opportunity cost of capital is the company’s WACC. If the systematic risk of the project is above or below average relative to the company’s current portfolio of projects, an upward or downward adjustment, respectively, is made to the company’s WACC
If we choose to use the company’s WACC in the calculation of the NPV of a project, we are assuming that the project:
◾has the same risk as the average-risk project of the company, and
◾will have a constant target capital structure throughout its useful life.
Para quantificar o custo da dívida temos duas alternativas:
Market value of debt, por aí tiramos a ytm no mercado.
Caso não seja possível … debt rating aproach
Based on a company’s debt rating, we estimate the before-tax cost of debt by using the yield on comparably rated bonds for maturities that closely match that of the company’s existing debt.
Para além do CAPM podemos calcular o Ke recorrendo a um modelo de fatores múltiplos que consiste …
Ke= rf+ B1(Factor risk premium)+B2*(Factor risk premium 2)….
Neste caso o Beta é a sensibilidade da ação ao fator que pode ser um dado macro como a inflação ou o PIB. O factor risk premium é o risk premium subjacente no mercado para esse fator.
Para calcular o ERP podemos ir por vários caminhos, três dos quais são:
There are several ways to estimate the equity risk premium, though there is no general agreement as to the best approach. The three we discuss are the historical equity risk premium approach, the dividend discount model approach, and the survey approach.
DDM:
P0 = D1/(Ke-g) (constant growth)
g- taxa anual de crescimento dos dividendos
Como é que calculamos a sustainable growth rate dos dividendos?
Para calcular devemos primeiro obter o ROE da empresa, depois devemos saber qual é taxa de retenção dos resultados. E temos que g= ROE *retenção
Sendo que g= ROE*(1 - dividend payout ratio)
dividend payout ratio = Dividends/EPS
Quanto é que é o Beta da dívida?
Se precisarmos de estimar um Beta não alavancado através de um concorrente para posteriormente chegarmos ao Beta alavancado como é que procedemos? PURE PLAY METHOD
é 0
Primeiro Bun= Bdebt* D(1-T)/(E+D(1-T) + Beq * E/(D(1-T)+E)
Visto que Bdebt é 0…
Bun= Beq* 1/(1+(1-T)*(D/E))
Tiramos o Bun e posteriormente usamos o T e o (D/E) para tirar o Beq da empresa que pretendemos.
Suppose that the beta of a publicly traded company’s stock is 1.3 and that the market value of equity and debt are, respectively, C$540 million and C$720 million. If the marginal tax rate of this company is 40 percent, what is the asset beta of this company?
0,7222222222
BAAAAMOOOOOOSSSS
Raymond Cordier is the business development manager of Aerotechnique S.A., a private Belgian subcontractor of aerospace parts. Although Aerotechnique is not listed on the Belgian stock exchange, Cordier needs to evaluate the levered beta for the company. He has access to the following information:
◾The average levered and average unlevered betas for the group of comparable companies operating in different European countries are 1.6 and 1.0, respectively.
◾Aerotechnique’s debt-to-equity ratio, based on market values, is 1.4.
◾Aerotechnique’s corporate tax rate is 34 percent
1,924
Miles Avenaugh, an analyst with the Global Company, is estimating a country risk premium to include in his estimate of the cost of equity capital for Global’s investment in Argentina. Avenaugh has researched yields in Argentina and observed that the Argentinean government’s 10-year bond is 9.5 percent. A similar maturity US Treasury bond has a yield of 4.5 percent. The annualized standard deviation of the Argentina Merval stock index, a market value index of stocks listed on the Buenos Aires Stock Exchange, during the most recent year is 40 percent. The annualized standard deviation of the Argentina dollar-denominated 10-year government bond over the recent period was 28 percent.
What is the estimated country risk premium for Argentina based on Avenaugh’s research?
Countryriskpremium=0.05(0.4/0.28)=0.05(1.4286)=0.0714or7.14percent
Flotation cost o que são? na ótica de novo capital
São as comissões cobradas pelos bancos de investimento para que as empresas possam angariar novo capital.
So, if it is preferred to deduct the flotation costs as part of the net present value calculation, why do we see the adjustment in the cost of capital so often in textbooks? The first reason is that it is often difficult to identify particular financing associated with a project. Using the adjustment for the flotation costs in the cost of capital may be useful if specific project financing cannot be identified. Second, by adjusting the cost of capital for the flotation costs, it is easier to demonstrate how costs of financing a company change as a company exhausts internally generated equity (i.e., retained earnings) and switches to externally generated equity (i.e., a new stock issue).
Geralmente podem ser deduzidas na componente de um outlay que é financiada por equity.
Por exemplo se num projeto outlay de 10k é equity e os flotation cost são 5% logo temos que adicionar 500 ao outlay de equity que passa a ser 10.5k.
2 tipos principais de falência
reorganization - é feito um plano de pagamentos e uma reestruturação.
Liquidation - a empresa vende os seus ativos e para de existir.
Geralmente empresas com DFL elevado, empresas com muita alavancagem financeira são mais propensas a reorganizarem porque alteram as suas estruturas de capitais para se tornarem viáveis.
Leverage,
Business Risk
Financial risk
Leverage is the use of fixed costs in a company’s cost structure. Business risk is the risk associated with operating earnings and reflects both sales risk (uncertainty with respect to the price and quantity of sales) and operating risk (the risk related to the use of fixed costs in operations). Financial risk is the risk associated with how a company finances its operations (i.e., the split between equity and debt financing of the business).
breakeven point
operational breakeven point
Bep = (F+C)/(P-V)
Bep O = F/(P-V)
F - fixed Cost
C - Interest Cost
P - Valor de venda
V - Variable Cost
DOL
DFL
DTL
Degree of operational leverage:
Q(P-V)/(Q(P-V)-F)
Degree of financial leverage:
(Q(P-V)-F)/(Q(P-V)-F-C)
Degree of Total leverage:
DOL*DFL
•Using the dividend discount model, what is the cost of equity capital for Zeller Mining if the company will pay a dividend of C$2.30 next year, has a payout ratio of 30 percent, a return on equity (ROE) of 15 percent, and a stock price of C$45?
A.9.61 percent.
B.10.50 percent.
C.15.61 percent.
C is correct. First calculate the growth rate using the sustainable growth calculation, and then calculate the cost of equity using the rearranged dividend discount model:
•Dot.Com has determined that it could issue $1,000 face value bonds with an 8 percent coupon paid semi-annually and a five-year maturity at $900 per bond. If Dot.Com’s marginal tax rate is 38 percent, its after-tax cost of debt is closest to:
A.6.2 percent.
B.6.4 percent.
C.6.6 percent.
C is correct.
A financial analyst at Buckco Ltd. wants to compute the company’s weighted average cost of capital (WACC) using the dividend discount model. The analyst has gathered the following data:
Before-tax cost of new debt 8 percent
Tax rate 40 percent
Target debt-to-equity ratio 0.8033
Stock price $30
Next year’s dividend $1.50
Estimated growth rate 7 percent
Buckco’s WACC is closest to:
A.8 percent.
B.9 percent.
C.12 percent.
B is correct.
Wang Securities had a long-term stable debt-to-equity ratio of 0.65. Recent bank borrowing for expansion into South America raised the ratio to 0.75. The increased leverage has what effect on the asset beta and equity beta of the company?
A.The asset beta and the equity beta will both rise.
B.The asset beta will remain the same and the equity beta will rise.
C.The asset beta will remain the same and the equity beta will decline.
B is correct. Asset risk does not change with a higher debt-to-equity ratio. Equity risk rises with higher debt
Trumpit Resorts Company currently has 1.2 million common shares of stock outstanding and the stock has a beta of 2.2. It also has $10 million face value of bonds that have five years remaining to maturity and 8 percent coupon with semi-annual payments, and are priced to yield 13.65 percent. If Trumpit issues up to $2.5 million of new bonds, the bonds will be priced at par and have a yield of 13.65 percent; if it issues bonds beyond $2.5 million, the expected yield on the entire issuance will be 16 percent. Trumpit has learned that it can issue new common stock at $10 a share. The current risk-free rate of interest is 3 percent and the expected market return is 10 percent. Trumpit’s marginal tax rate is 30 percent. If Trumpit raises $7.5 million of new capital while maintaining the same debt-to-equity ratio, its weighted average cost of capital is closest to:
A.14.5 percent.
B.15.5 percent.
C.16.5 percent.
B is correct.
RESOLVER COM TEMPO 5 perguntas prai…..
Jurgen Knudsen has been hired to provide industry expertise to Henrik Sandell, CFA, an analyst for a pension plan managing a global large-cap fund internally. Sandell is concerned about one of the fund’s larger holdings, auto parts manufacturer Kruspa AB. Kruspa currently operates in 80 countries, with the previous year’s global revenues at €5.6 billion. Recently, Kruspa’s CFO announced plans for expansion into China. Sandell worries that this expansion will change the company’s risk profile and wonders if he should recommend a sale of the position.
Sandell provides Knudsen with the basic information. Kruspa’s global annual free cash flow to the firm is €500 million and earnings are €400 million. Sandell estimates that cash flow will level off at a 2 percent rate of growth. Sandell also estimates that Kruspa’s after-tax free cash flow to the firm on the China project for next three years is, respectively, €48 million, €52 million, and €54.4 million. Kruspa recently announced a dividend of €4.00 per share of stock. For the initial analysis, Sandell requests that Knudsen ignore possible currency fluctuations. He expects the Chinese plant to sell only to customers within China for the first three years. Knudsen is asked to evaluate Kruspa’s planned financing of the required €100 million with a €80 public offering of 10-year debt in Sweden and the remainder with an equity offering.
Additional information:
Equity risk premium, Sweden 4.82
percentRisk-free rate of interest, Sweden 4.25 percentIndustry debt-to-equity ratio 0.3
Market value of Kruspa’s deb t€900million Market value of Kruspa’s equity €2.4 billion
Kruspa’s equity beta 1.3
Kruspa’s before-tax cost of debt 9.25 percent
China credit A2 country risk premium 1.88 percentCorporate tax rate37.5 percentInterest payments each yearLevel
•Using the capital asset pricing model, Kruspa’s cost of equity capital for its typical project is closest to:
A.7.62 percent.
B.10.52 percent.
C.12.40 percent.
•Sandell is interested in the weighted average cost of capital of Kruspa AB prior to its investing in the China project. This weighted average cost of capital (WACC) is closest to:
A.7.65 percent.
B.9.23 percent.
C.10.17 percent.
•In his estimation of the project’s cost of capital, Sandell would like to use the asset beta of Kruspa as a base in his calculations. The estimated asset beta of Kruspa prior to the China project is closest to:
A.1.053.
B.1.110.
C.1.327.
•Sandell is performing a sensitivity analysis of the effect of the new project on the company’s cost of capital. If the China project has the same asset risk as Kruspa, the estimated project beta for the China project, if it is financed 80 percent with debt, is closest to:
A.1.300.
B.2.635.
C.3.686.
•As part of the sensitivity analysis of the effect of the new project on the company’s cost of capital, Sandell is estimating the cost of equity of the China project considering that the China project requires a country equity premium to capture the risk of the project. The cost of equity for the project in this case is closest to:
A.10.52 percent.
B.19.91 percent.
C.28.95 percent.
•In his report, Sandell would like to discuss the sensitivity of the project’s net present value to the estimation of the cost of equity. The China project’s net present value calculated using the equity beta without and with the country risk premium are, respectively:
A.€26 million and €24 million.
B.€28 million and €25 million.
C.€30 million and €27 million.
•B is correct.
WACC = [(€900/€3300) .0925 (1 − 0.375)] + [(€2400/€3300)(0.1052)] = 0.0923 or 9.23%
•A is correct.
Asset beta = Unlevered beta = 1.3/(1 + [(1−0.375)(€900/€2400)] = 1.053
•C is correct.
Project beta = 1.053 {1 + [(1 − 0.375)(€80/€20)]} = 1.053 {3.5} = 3.686
•C is correct.
re = 0.0425 + 3.686(0.0482 + 0.0188) = 0.2895 or 28.95%
•C is correct.
The marginal cost of capital for TagOn, based on an average asset beta of 2.27 for the industry and assuming that new stock can be issued at $8 per share, is closest to:
A.20.5 percent.
B.21.0 percent.
C.21.5 percent.
C is correct.
Two years ago, a company issued $20 million in long-term bonds at par value with a coupon rate of 9 percent. The company has decided to issue an additional $20 million in bonds and expects the new issue to be priced at par value with a coupon rate of 7 percent. The company has no other debt outstanding and has a tax rate of 40 percent. To compute the company’s weighted average cost of capital, the appropriate after-tax cost of debt is closest to:
A.4.2%.
B.4.8%.
C.5.4%.
A is correct. The relevant cost is the marginal cost of debt. The before-tax marginal cost of debt can be estimated by the yield to maturity on a comparable outstanding. After adjusting for tax, the after-tax cost is 7(1 − 0.4) = 7(0.6) = 4.2%.
An analyst gathered the following information about a private company and its publicly traded competitor:
Comparable Companies
Tax Rate (%)
Debt/Equity
Tax Rate Debt/Eq Equity Beta Private company 30.0 1.00 N.A. Public company 35.0 0.90 1.75
Using the pure-play method, the estimated equity beta for the private company is closest to:
A.1.029.
B.1.104.
C.1.877.
•C is correct. Inferring the asset beta for the public company: unlevered beta = 1.75/[1 + (1 − 0.35) (0.90)] = 1.104. Relevering to reflect the target debt ratio of the private firm: levered beta = 1.104 × [1 + (1 − 0.30) (1.00)] = 1.877.
utilizar.
An analyst gathered the following information about the capital markets in the United States and in Paragon, a developing country.
Selected Market Information (%)
Yield on US 10-year Treasury bond 4.5
Yield on Paragon 10-year government bond 10.5
Annualized standard deviation of Paragon stock index 35.0
Annualized standard deviation of Paragon dollar-denominated government bond 25.0
Based on the analyst’s data, the estimated country equity premium for Paragon is closest to:
A.4.29%.
B.6.00%.
C.8.40%.
•C is correct. The country equity premium can be estimated as the sovereign yield spread times the volatility of the country’s stock market relative to its bond market. Paragon’s equity premium is (10.5% – 4.5%) × (35%/25%) = 6% × 1.4 = 8.40%.
•If two companies have identical unit sales volume and operating risk, they are most likely to also have identical:
A.sales risk.
B.business risk.
C.sensitivity of operating earnings to changes in the number of units produced and sold.
•C is correct. The companies’ degree of operating leverage should be the same, consistent with C. Sales risk refers to the uncertainty of the number of units produced and sold and the price at which units are sold. Business risk is the joint effect of sales risk and operating risk.
•Degree of operating leverage is best described as a measure of the sensitivity of:
A.net earnings to changes in sales.
B.fixed operating costs to changes in variable costs.
C.operating earnings to changes in the number of units produced and sold.
•C is correct. The degree of operating leverage is the elasticity of operating earnings with respect to the number of units produced and sold. As an elasticity, the degree of operating leverage measures the sensitivity of operating earnings to a change in the number of units produced and sold.
•The Fulcrum Company produces decorative swivel platforms for home televisions. If Fulcrum produces 40 million units, it estimates that it can sell them for $100 each. Variable production costs are $65 per unit and fixed production costs are $1.05 billion. Which of the following statements is most accurate? Holding all else constant, the Fulcrum Company would:
A.generate positive operating income if unit sales were 25 million.
B.have less operating leverage if fixed production costs were 10 percent greater than $1.05 billion.
C.generate 20 percent more operating income if unit sales were 5 percent greater than 40 million.
•C is correct. Because DOL is 4, if unit sales increase by 5 percent, Fulcrum’s operating earnings are expected to increase by 4 × 5% = 20%. The calculation for DOL is:
Myundia Motors now sells 1 million units at ¥3,529 per unit. Fixed operating costs are ¥1,290 million and variable operating costs are ¥1,500 per unit. If the company pays ¥410 million in interest, the levels of sales at the operating breakeven and breakeven points are, respectively:
A.¥1,500,000,000 and ¥2,257,612,900.
B.¥2,243,671,760 and ¥2,956,776,737.
C.¥2,975,148,800 and ¥3,529,000,000.
B is correct.
.
The most appropriate response to Cho’s question regarding a description of the degree of total leverage is that degree of total leverage is:
A.the percentage change in net income divided by the percentage change in units sold.
B.the percentage change in operating income divided by the percentage change in units sold.
C.the percentage change in net income divided by the percentage change in operating income.
A is correct. Degree of total leverage is defined as the percentage change in net income divided by the percentage change in units sold.
Dividend Reivestment Plans o que são? quais são as formas de DRP?
Basicamente o accionista comunica à empresa que pretende um DRP e os dividendos desse accionista são reinvestidos de uma de 3 maneiras:
1- compra de ações em mercado secundário pela empresa.
2- Emissão de novas ações com o intuito de satisfazer o DRP.
3- Misto de ambos
O DRP permite que a empresa se financie sem custos de intermediação e também faz com que os pequenos accionistas se mantenham leais à empresa. Geralmente pelo DRP as ações são compradas a desconto. Uma das desvantagens é que os accionistas são taxados mesmo não tendo recebido o dinheiro.
extra dividend
stock dividend
é um dividendo que é pago fora do período regular. Geralmente empresas cíclicas usam este dividendo extra quando os resultados são muito bons.
stock dividend é um dividendo pago numa nova emissão de ações
EX- dividend date
Holder of record date
Ex dividend date é a data limite para comprar ações e receber dividendos. Nesta data a ação já abre com um preço descontado do dividendo.(A data é dada pela bolsa onde transacciona).
Holder of record date, geralmente é dois dias após o ex dividend date, é a data em que são apurados os donos das ações para posteriormente lhes destribuir dividendos. (A data é determinada pela empresa)
razões para as empresas fazerem share repurchase
◾to communicate that management perceives shares in the company to be undervalued in the marketplace or more generally to support share prices—this motivation was the most frequently mentioned by US chief financial officers in one survey;
◾flexibility in distributing cash to shareholders—share repurchases permit the company’s management flexibility as to amount and timing and are not perceived as establishing an expectation that a level of repurchase activity will continue in the future;
◾tax efficiency in distributing cash, in markets in which the tax rate on cash dividends exceeds the tax rate on capital gains; and
◾to absorb increases in shares outstanding resulting from the exercise of employee stock options.
Other motivations for a share repurchase are also possible. For example, share repurchase might merely reflect that the corporation has accumulated more cash than it has profitable uses for and does not want to pay an extra cash dividend.
4 formas diferentes da empresa recomprar ações.
- Buy in the open market. This method of share repurchase is the most common, with the company buying its own shares as conditions warrant in the open market. The open market share repurchase method gives the company maximum flexibility. Open market repurchases are the most flexible option for a company because there is no legal obligation to undertake or complete the repurchase program—a company may not follow through with an announced program for various reasons, such as unexpected cash needs for liquidity, acquisitions, or capital expenditures. In the United States, open market transactions do not require shareholder approval. Because shareholder approval is required in Europe, Vermaelen (2005) suggested that all companies have such authorization in place in case the opportunity to buy back undervalued shares occurs in the future.19 Authorizations to repurchase stock can last for years. In many shareholders’ minds, the announcement of a repurchase policy provides support for the share price. If the share repurchases are competently timed to minimize price impact and to exploit perceived undervaluation in the marketplace, this method is also relatively cost effective.
- Buy back a fixed number of shares at a fixed price. Sometimes a company will make a fixed price tender offer to repurchase a specific number of shares at a fixed price that is typically at a premium to the current market price. For example, in Australia, if a stock is selling at A$37 a share, a company might offer to buy back 5 million shares from current shareholders at A$40. If shareholders are willing to sell more than 5 million shares, the company will typically buy back a pro rata amount from each shareholder. By setting a fixed date, such as 30 days in the future, a fixed price tender offer can be accomplished quickly.
- Dutch Auction. A Dutch auction is also a tender offer to existing shareholders, but instead of specifying a fixed price for a specific number of shares, the company stipulates a range of acceptable prices. A Dutch auction uncovers the minimum price at which the company can buy back the desired number of shares with the company paying that price to all qualifying bids. For example, if the stock price is A$37 a share, the company would offer to buy back 5 million shares in a range of A$38 to A$40 a share. Each shareholder would then indicate the number of shares and the lowest price at which he or she would be willing to sell. The company would then begin to qualify bids beginning with those shareholders who submitted bids at A$38 and continue to qualify bids at higher prices until 5 million shares had been qualified. In our example, that price might be A$39.20 Shareholders who bid between A$38 and A$39, inclusive, would then be paid A$39 per share for their shares. Like Method 2, Dutch auctions can be accomplished in a short time period.21
- Repurchase by direct negotiation. In some markets, a company may negotiate with a major shareholder to buy back its shares, often at a premium to the market price. The company may do this to keep a large block of shares from overhanging the market (and thus acting to dampen the share price). A company may try to prevent an “activist” shareholder from gaining representation on the board of directors. In some of the more infamous cases, unsuccessful takeover attempts have ended with the company buying back the would-be suitor’s shares at a premium to the market price in what is referred to as a greenmail transaction, often to the detriment of remaining shareholders.22 Vermaelen (2005) reported, however, that 45 percent of private repurchases between 1984 and 2001 were actually made at discounts, indicating that many direct negotiation repurchases are generated by the liquidity needs of large investors who are in a weak negotiating position.
Share repurchase increase or decrease the EPS?
In summary, a share repurchase may increase, decrease, or have no effect on EPS. The effect depends on whether the repurchase is financed internally or externally. In the case of internal financing, a repurchase increases EPS only if the funds used for the repurchase would not earn their cost of capital if retained by the company.26 In the case of external financing, the effect on EPS is positive if the earnings yield exceeds the after-tax cost of financing the repurchase. In Example 7, when the after-tax borrowing rate equaled the earnings yield of 5 percent, EPS was unchanged as a result of the buyback. Any after-tax borrowing rate above the earnings yield would result in a decline in EPS, whereas an after-tax borrowing rate less than the earnings yield would result in an increase in EPS.
These relationships should be viewed with caution so far as any valuation implications are concerned. Notably, to infer that an increase in EPS indicates an increase in shareholders’ wealth would be incorrect. For example, the same idle cash could also be distributed as a cash dividend. Informally, if one views the total return on a stock as the sum of the dividend yield and a capital gains return, any capital gains as a result of the boost to EPS from the share repurchase may be at the expense of an offsetting loss in terms of dividend yield.
Florida Citrus (FC) common shares sell at $20, and there are 10 million shares outstanding. Management becomes aware that Kirk Parent recently purchased a major position in its outstanding shares with the intention of influencing the business operations of FC in ways the current board does not approve. An adviser to the board has suggested approaching Parent privately with an offer to buy back $50 million worth of shares from him at $25 per share, which is a $5 premium over the current market price. The board of FC declines to do so because of the effect of such a repurchase on FC’s other shareholders. Determine the effect of the proposed share repurchase on the wealth of shareholders other than Parent.
With $50 million, FC could repurchase $50 million/$25 = 2 million shares from Parent. The post-repurchase share price would be $18.75, which can be calculated as the market value of equity after the $50 million share repurchase divided by the shares outstanding after the share repurchase, or [(10 million)($20) − $50 million]/(10 million − 2 million) = $150 million/8 million = $18.75. Shareholders other than Parent would lose $20 − $18.75 = $1.25 for each share owned. Although this share repurchase would conserve total wealth (including Parent’s), it effectively transfers wealth to Parent from the other shareholders.
If the buyback market price is greater (less) than the book value, the book value will decline (increase).
A. True
B. False
A
The payment of a 10 percent stock dividend by a company will result in an increase in that company’s:
A.current ratio.
B.financial leverage.
C.contributed capital.
C is correct. A stock dividend is accounted for as a transfer of retained earnings to contributed capital.
All other things being equal, the payment of an internally financed cash dividend is most likely to result in:
A.a lower current ratio.
B.a higher current ratio.
C.the same current ratio.
A is correct. By reducing corporate cash, a cash dividend reduces the current ratio, whereas a stock dividend (whatever the size) has no effect on the current ratio.
The calendar dates in Column 1 are potentially significant dates in a typical dividend chronology. Column 2 lists descriptions of these potentially significant dates (in random order).
Column 1
Column 2
Friday, 10 June A. Holder-of-record dateThursday,
23 June B. Declaration dateFriday,
24 June C. Payment dateTuesday,
28 June D. Ex-dividend dateSunday,
10 July E. Last day shares trade with the right to receive the dividend
colocar por orden cronologica
b,e,d,a,c,
Mary Young intends to take a position in Megasoft Industries once Megasoft begins paying dividends. A dividend of C$4 is payable by Megasoft on 2 December. The ex-dividend date for the dividend is 10 November, and the holder-of-record date is 12 November. What is the last possible date for Young to purchase her shares if she wants to receive the dividend?
A.9 November.
B.10 November.
C.12 November.
A is correct. To receive the dividend, one must purchase before the ex-dividend date.
