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Introduction to Financial Models for Management and Planning, Second Edition.

By: Morris, James R.
Contributor(s): Daley, John P.
Material type: TextTextSeries: eBooks on Demand.Publisher: Philadelphia, PA : CRC Press, 2017Copyright date: ©2017Edition: 2nd ed.Description: 1 online resource (668 pages).Content type: text Media type: computer Carrier type: online resourceISBN: 9781498765046.Subject(s): CorporationsGenre/Form: Electronic books.Additional physical formats: Print version:: Introduction to Financial Models for Management and Planning, Second EditionDDC classification: 658.15015195 Online resources: Click here to view this ebook.
Contents:
Cover -- Title Page -- Copyright Page -- Dedication -- Table of Contents -- Preface to the Second Edition -- Authors -- CHAPTER 1: An Overview of Financial Planning and Modeling -- 1.1 WHAT IS PLANNING? -- 1.2 WHAT IS FINANCIAL PLANNING? -- 1.3 THE INPUT TO FINANCIAL PLANNING -- 1.3.1 The Goals of Financial Decisions -- 1.3.2 The Decision Alternatives -- 1.3.3 The Links between Decisions and Goals -- 1.3.4 Resources and Constraints -- 1.3.4.1 Company-Specific Resources and Constraints -- 1.3.4.2 Industry-Specific Constraints -- 1.3.4.3 Constraints Imposed by the Economy -- 1.3.4.4 Constraints Imposed by the Legal and Political Environment -- 1.3.5 The Planning Horizon and the Amount of Detail -- 1.3.5.1 The Length of the Planning Horizon -- 1.3.5.2 The Amount of Detail -- 1.4 INGREDIENTS OF A FINANCIAL MODEL -- 1.4.1 What Is a Model? -- 1.4.2 What Does a Model Do? -- 1.5 HOW TO DEVELOP THE MODEL -- 1.5.1 The Decision Problem -- 1.5.1.1 What Is the Problem? -- 1.5.1.2 What Questions Must Be Answered? -- 1.5.1.3 What Is the Time Horizon of the Problem? -- 1.5.1.4 How Important Is the Problem? -- 1.5.2 The Output -- 1.5.2.1 What Kind of Information Is Needed? -- 1.5.2.2 How Will the Information Be Evaluated? -- 1.5.2.3 What Kind of Detail Is Necessary? -- 1.5.2.4 Who Will Use the Information? -- 1.5.3 The Structural Input -- 1.5.3.1 What Is the Goal? -- 1.5.3.2 What Are the Decision Alternatives? -- 1.5.3.3 What Are the Linkages between the Decisions and the Goal? -- 1.5.3.4 What Are the Constraints? -- 1.5.3.5 What Is the Planning Horizon? -- 1.5.4 The Data Input -- 1.5.4.1 The Current State of the System -- 1.5.4.2 Relations between Variables -- 1.5.4.3 Forecasts of Future Conditions -- 1.6 TYPES OF MODELS -- 1.6.1 Simulation -- 1.6.2 Optimization -- 1.7 WHAT DO WE GET OUT OF IT? -- 1.7.1 Explicit Benefits -- 1.7.2 Implicit Benefits -- 1.8 SUMMARY.
SECTION I: Tools for Financial Planning and Modeling: Financial Analysis -- CHAPTER 2: The Tools for Financial Planning: Financial Analysis -- 2.1 INTRODUCTION -- 2.2 FINANCIAL RATIO ANALYSIS -- 2.2.1 Example: The Odd & Rich Corporation -- 2.2.2 DuPont Analysis -- 2.2.2.1 Pricing and Costs -- 2.2.2.2 Asset Utilization -- 2.2.2.3 Operating Cycle -- 2.2.2.4 The Equity Multiplier and Financial Leverage -- 2.3 BREAK-EVEN ANALYSIS -- 2.3.1 Fixed and Variable Costs -- 2.4 ANALYSIS OF OPERATING AND FINANCIAL LEVERAGE -- 2.4.1 Degree of Operating Leverage -- 2.4.2 Degree of Financial Leverage -- 2.4.3 Degree of Combined Leverage -- 2.5 CONCLUSION -- CHAPTER 3: The Tools for Financial Planning: Growth, Cash Flows,and Cash Budgeting -- 3.1 PROJECTING PROFORMA FINANCIAL STATEMENTS -- 3.2 GROWTH AND THE NEED FOR FINANCING -- 3.2.1 Required External Financing -- 3.2.2 Sustainable Growth -- 3.3 CASH FLOW -- 3.3.1 Cash Flow from Operations -- 3.3.2 Cash Flow from Investing -- 3.3.3 Cash Flows from Financing -- 3.3.4 Other Definitions of Cash Flows -- 3.3.4.1 Equity Cash Flow -- 3.3.4.2 Cash Flow to Invested Capital -- 3.4 CASH RECEIPTS AND DISBURSEMENTS -- 3.4.1 Example: The Mogul Corporation -- 3.5 CONCLUSION -- SECTION II: Tools for Financial Planning and Modeling: Simulation -- CHAPTER 4: Financial Statement Simulation -- 4.1 INTRODUCTION -- 4.2 THE ACCOUNTING MODULE -- 4.2.1 Equations of the Module -- 4.2.2 The Income Generation Module -- 4.2.3 The Investment Module -- 4.2.4 The Financing Module -- 4.3 EQUILIBRIUM IN THE SIMULATION MODULE -- 4.4 BUILDING A LONG-RANGE PLANNING MODEL -- 4.4.1 Model of O&R Corp. -- 4.4.2 Testing the Model -- 4.4.3 Tracking Performance -- 4.4.4 Valuation -- 4.4.4.1 The Valuation Module -- 4.4.4.2 Evaluation and Sensitivity Analysis -- 4.5 CONTROLLING THE FLOW OF EXCESS CASH -- 4.5.1 Purchasing Marketable Securities.
4.5.1.1 Adding Transparency to Required External Financing -- 4.5.1.2 Retiring Short- and Long-Term Debt and Repurchasing Equity -- 4.6 CONCLUSION -- CHAPTER 5: Modeling Value -- 5.1 INTRODUCTION -- 5.2 CASH FLOW TO EQUITY -- 5.2.1 Dividends versus Dividend-Paying Ability -- 5.3 COST OF EQUITY -- 5.3.1 A Simplistic Approach to the Cost of Equity -- 5.3.2 Time-Varying Market-Value-Based Beta -- 5.3.2.1 Circularity -- 5.3.2.2 Automatic Iterations -- 5.4 DILUTION: VALUE PER SHARE AND ISSUING NEW EQUITY -- 5.4.1 Example: Mythic Corporation -- 5.4.2 Adding Dilution to the O&R Model -- 5.5 VALUE OF INVESTED CAPITAL -- 5.5.1 The Weighted Average Cost of Capital, WACC -- 5.5.2 The Invested Capital Approach Using Time-Varying Market-Value-Based Capital Ratios -- 5.5.3 Value Difference between the Equity Approach and the Invested Capital Approach -- 5.6 TERMINAL VALUE -- 5.6.1 The Constant Growth Model -- 5.6.1.1 Components of the Terminal Growth Rate -- 5.6.2 Other Models of Terminal Value -- 5.7 CAVEATS AND EXTENSIONS -- 5.7.1 Value for a Nondividend Paying Firm -- 5.7.2 Valuing Equity Cash Flow When Not All Free Cash Flow Is Paid Out -- 5.7.3 Additional Dividend Nuances -- 5.8 SUMMARY -- CHAPTER 6: Planning for Uncertainty: Monte Carlo Simulation -- 6.1 INTRODUCTION -- 6.2 MONTE CARLO SIMULATION -- 6.3 MONTE CARLO SOFTWARE: @RISK -- 6.4 THE EBITDA MODEL WITH @RISK -- 6.4.1 Adding an Output Variable -- 6.4.2 Simulation Settings -- 6.4.3 Running a Simulation -- 6.4.4 Analyzing the Results -- 6.4.5 Detailed Results -- 6.4.6 Putting the Output into a Spreadsheet -- 6.4.7 Correlating Variables -- 6.4.7.1 Model Results with Correlated Variables -- 6.5 USING MONTE CARLO SIMULATION TO EVALUATE A COST-MANAGEMENT PROPOSAL -- 6.5.1 Establishing the Benchmark -- 6.5.2 Odd & Rich under Uncertainty -- 6.5.2.1 Operating Costs -- 6.5.2.2 Current Assets.
6.5.2.3 Current Liabilities -- 6.5.2.4 Gross Fixed Assets -- 6.5.2.5 Growth, Long and Short -- 6.5.2.6 Adding Monte Carlo Simulation -- 6.5.2.7 Measuring Risk Away's Promise -- 6.6 SUMMARY -- SECTION III: Introduction to Forecasting Methods -- CHAPTER 7: Forecasting: Time Trend Extrapolation -- 7.1 AN INTRODUCTION TO FORECASTING -- 7.1.1 Qualitative versus Quantitative Forecasts -- 7.2 STEPS FOR DEVELOPING A FORECASTING MODEL -- 7.3 TIME TREND EXTRAPOLATION -- 7.3.1 Estimation Period versus Hold-Out Period -- 7.3.2 Time Trend Extrapolation Using Linear Regression -- 7.3.2.1 The Constant-Change Model -- 7.3.2.2 The Compound-Growth Model -- 7.3.3 Assessing Model Validity and Accuracy -- 7.3.3.1 Evaluating Model Validity -- 7.4 EVALUATING FORECAST ACCURACY -- 7.4.1 Diagnostic Measures -- 7.4.1.1 Mean Error -- 7.4.1.2 Mean Absolute Deviation -- 7.4.1.3 Root Mean Square Error -- 7.4.1.4 Residual Standard Error -- 7.4.2 Combining the Estimation Period and the Hold-Out Period -- 7.4.3 The Last Step: Making the Forecast -- 7.4.4 Assessing Forecast Accuracy: Confidence Intervals -- 7.4.4.1 The Standard Error of the Forecast -- 7.4.4.2 The Critical Statistic -- 7.5 PROBLEMS WITH THE FORECASTING MODEL -- 7.6 SUMMARY -- CHAPTER 8: Forecasting with Econometric Models -- 8.1 DEVELOPING A STRUCTURAL ECONOMETRIC MODEL -- 8.1.1 Example: Speckled Band, Inc. -- 8.1.1.1 The Economic and Industry Context -- 8.1.2 Confidence Interval of the Forecast -- 8.2 SUMMARY -- CHAPTER 9: Forecasting with Smoothed Data -- 9.1 INTRODUCTION -- 9.2 MOVING AVERAGE -- 9.3 EXPONENTIAL SMOOTHING -- 9.4 EVALUATING THE MODEL -- 9.4.1 Making the Forecast -- 9.5 SEASONALITY AND SEASONAL DECOMPOSITION -- 9.5.1 Sources of Variation in Data -- 9.5.2 Seasonal Adjustment Factors -- 9.5.2.1 Estimating the Seasonal Adjustment Factors -- 9.5.3 Removing Seasonality -- 9.5.4 Forecasting Sales.
9.5.5 Review of Seasonal Adjustment -- 9.5.5.1 Cyclicality -- 9.5.6 The Final Forecast -- 9.6 SUMMARY -- SECTION IV: A Closer Look at the Details of a Financial Model -- CHAPTER 10: Modeling Long-Term Assets, Capital Budgeting, and Merger Decisions -- 10.1 FIXED ASSETS IN A LONG RUN PLANNING MODEL -- 10.2 DIRECT INVESTMENT EVALUATION -- 10.2.1 Investment Evaluation -- 10.2.2 The Invested Capital Method -- 10.2.2.1 Cost of Investment -- 10.2.2.2 Discount Rate -- 10.2.2.3 Cash Flow to Invested Capital -- 10.2.3 The Equity Method -- 10.2.4 Working Capital -- 10.3 EXAMPLE: EVALUATING AN INVESTMENT FOR STILIKO PLASTICS -- 10.3.1 The Details of the Investment -- 10.3.1.1 The Opportunity -- 10.3.1.2 The Objective -- 10.3.1.3 Financing -- 10.3.1.4 The Planning Horizon -- 10.3.1.5 The Constraints: Sales, Production, and Costs -- 10.3.1.6 Project Investment -- 10.3.1.7 Depreciation -- 10.3.1.8 Terminal (Salvage) Value -- 10.3.2 Constructing the Spreadsheet Model -- 10.3.2.1 Data Input -- 10.3.2.2 Data Processing Sheet -- 10.3.2.3 Initial Investment -- 10.3.2.4 Accounting Sections -- 10.3.2.5 Costs of Capital Section -- 10.3.2.6 Evaluation Sheet -- 10.3.2.7 The Invested Capital Method -- 10.3.2.8 Equity Method -- 10.3.3 Evaluating the Investment's Impact on the Firm -- 10.4 EXAMPLE: GENETIC SYSTEMS CORPORATION -- 10.4.1 Success and Failure in Pharmaceutical Research and Development -- 10.4.1.1 Conventional Analysis of the Project Net Present Value -- 10.4.1.2 Risk in the R&D Program -- 10.4.2 Monte Carlo Simulation of Project -- 10.5 MODELING MERGERS AND ACQUISITIONS -- 10.5.1 Overview -- 10.5.2 Modeling the Merger and Acquisition Problem -- 10.5.2.1 The Merger -- 10.5.2.2 Synergies -- 10.5.3 Monte Carlo Simulation -- 10.5.3.1 COGS -- 10.5.3.2 SG&A -- 10.5.3.3 R&D -- 10.5.3.4 Receivables and Inventory -- 10.5.3.5 Gross PPE -- 10.5.3.6 Accounts Payable.
10.5.3.7 Growth Rates.
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Electronic Book UT Tyler Online
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HG4012.5.M673 2016 (Browse shelf) https://ebookcentral.proquest.com/lib/uttyler/detail.action?docID=4867584 Available EBC4867584

Cover -- Title Page -- Copyright Page -- Dedication -- Table of Contents -- Preface to the Second Edition -- Authors -- CHAPTER 1: An Overview of Financial Planning and Modeling -- 1.1 WHAT IS PLANNING? -- 1.2 WHAT IS FINANCIAL PLANNING? -- 1.3 THE INPUT TO FINANCIAL PLANNING -- 1.3.1 The Goals of Financial Decisions -- 1.3.2 The Decision Alternatives -- 1.3.3 The Links between Decisions and Goals -- 1.3.4 Resources and Constraints -- 1.3.4.1 Company-Specific Resources and Constraints -- 1.3.4.2 Industry-Specific Constraints -- 1.3.4.3 Constraints Imposed by the Economy -- 1.3.4.4 Constraints Imposed by the Legal and Political Environment -- 1.3.5 The Planning Horizon and the Amount of Detail -- 1.3.5.1 The Length of the Planning Horizon -- 1.3.5.2 The Amount of Detail -- 1.4 INGREDIENTS OF A FINANCIAL MODEL -- 1.4.1 What Is a Model? -- 1.4.2 What Does a Model Do? -- 1.5 HOW TO DEVELOP THE MODEL -- 1.5.1 The Decision Problem -- 1.5.1.1 What Is the Problem? -- 1.5.1.2 What Questions Must Be Answered? -- 1.5.1.3 What Is the Time Horizon of the Problem? -- 1.5.1.4 How Important Is the Problem? -- 1.5.2 The Output -- 1.5.2.1 What Kind of Information Is Needed? -- 1.5.2.2 How Will the Information Be Evaluated? -- 1.5.2.3 What Kind of Detail Is Necessary? -- 1.5.2.4 Who Will Use the Information? -- 1.5.3 The Structural Input -- 1.5.3.1 What Is the Goal? -- 1.5.3.2 What Are the Decision Alternatives? -- 1.5.3.3 What Are the Linkages between the Decisions and the Goal? -- 1.5.3.4 What Are the Constraints? -- 1.5.3.5 What Is the Planning Horizon? -- 1.5.4 The Data Input -- 1.5.4.1 The Current State of the System -- 1.5.4.2 Relations between Variables -- 1.5.4.3 Forecasts of Future Conditions -- 1.6 TYPES OF MODELS -- 1.6.1 Simulation -- 1.6.2 Optimization -- 1.7 WHAT DO WE GET OUT OF IT? -- 1.7.1 Explicit Benefits -- 1.7.2 Implicit Benefits -- 1.8 SUMMARY.

SECTION I: Tools for Financial Planning and Modeling: Financial Analysis -- CHAPTER 2: The Tools for Financial Planning: Financial Analysis -- 2.1 INTRODUCTION -- 2.2 FINANCIAL RATIO ANALYSIS -- 2.2.1 Example: The Odd & Rich Corporation -- 2.2.2 DuPont Analysis -- 2.2.2.1 Pricing and Costs -- 2.2.2.2 Asset Utilization -- 2.2.2.3 Operating Cycle -- 2.2.2.4 The Equity Multiplier and Financial Leverage -- 2.3 BREAK-EVEN ANALYSIS -- 2.3.1 Fixed and Variable Costs -- 2.4 ANALYSIS OF OPERATING AND FINANCIAL LEVERAGE -- 2.4.1 Degree of Operating Leverage -- 2.4.2 Degree of Financial Leverage -- 2.4.3 Degree of Combined Leverage -- 2.5 CONCLUSION -- CHAPTER 3: The Tools for Financial Planning: Growth, Cash Flows,and Cash Budgeting -- 3.1 PROJECTING PROFORMA FINANCIAL STATEMENTS -- 3.2 GROWTH AND THE NEED FOR FINANCING -- 3.2.1 Required External Financing -- 3.2.2 Sustainable Growth -- 3.3 CASH FLOW -- 3.3.1 Cash Flow from Operations -- 3.3.2 Cash Flow from Investing -- 3.3.3 Cash Flows from Financing -- 3.3.4 Other Definitions of Cash Flows -- 3.3.4.1 Equity Cash Flow -- 3.3.4.2 Cash Flow to Invested Capital -- 3.4 CASH RECEIPTS AND DISBURSEMENTS -- 3.4.1 Example: The Mogul Corporation -- 3.5 CONCLUSION -- SECTION II: Tools for Financial Planning and Modeling: Simulation -- CHAPTER 4: Financial Statement Simulation -- 4.1 INTRODUCTION -- 4.2 THE ACCOUNTING MODULE -- 4.2.1 Equations of the Module -- 4.2.2 The Income Generation Module -- 4.2.3 The Investment Module -- 4.2.4 The Financing Module -- 4.3 EQUILIBRIUM IN THE SIMULATION MODULE -- 4.4 BUILDING A LONG-RANGE PLANNING MODEL -- 4.4.1 Model of O&R Corp. -- 4.4.2 Testing the Model -- 4.4.3 Tracking Performance -- 4.4.4 Valuation -- 4.4.4.1 The Valuation Module -- 4.4.4.2 Evaluation and Sensitivity Analysis -- 4.5 CONTROLLING THE FLOW OF EXCESS CASH -- 4.5.1 Purchasing Marketable Securities.

4.5.1.1 Adding Transparency to Required External Financing -- 4.5.1.2 Retiring Short- and Long-Term Debt and Repurchasing Equity -- 4.6 CONCLUSION -- CHAPTER 5: Modeling Value -- 5.1 INTRODUCTION -- 5.2 CASH FLOW TO EQUITY -- 5.2.1 Dividends versus Dividend-Paying Ability -- 5.3 COST OF EQUITY -- 5.3.1 A Simplistic Approach to the Cost of Equity -- 5.3.2 Time-Varying Market-Value-Based Beta -- 5.3.2.1 Circularity -- 5.3.2.2 Automatic Iterations -- 5.4 DILUTION: VALUE PER SHARE AND ISSUING NEW EQUITY -- 5.4.1 Example: Mythic Corporation -- 5.4.2 Adding Dilution to the O&R Model -- 5.5 VALUE OF INVESTED CAPITAL -- 5.5.1 The Weighted Average Cost of Capital, WACC -- 5.5.2 The Invested Capital Approach Using Time-Varying Market-Value-Based Capital Ratios -- 5.5.3 Value Difference between the Equity Approach and the Invested Capital Approach -- 5.6 TERMINAL VALUE -- 5.6.1 The Constant Growth Model -- 5.6.1.1 Components of the Terminal Growth Rate -- 5.6.2 Other Models of Terminal Value -- 5.7 CAVEATS AND EXTENSIONS -- 5.7.1 Value for a Nondividend Paying Firm -- 5.7.2 Valuing Equity Cash Flow When Not All Free Cash Flow Is Paid Out -- 5.7.3 Additional Dividend Nuances -- 5.8 SUMMARY -- CHAPTER 6: Planning for Uncertainty: Monte Carlo Simulation -- 6.1 INTRODUCTION -- 6.2 MONTE CARLO SIMULATION -- 6.3 MONTE CARLO SOFTWARE: @RISK -- 6.4 THE EBITDA MODEL WITH @RISK -- 6.4.1 Adding an Output Variable -- 6.4.2 Simulation Settings -- 6.4.3 Running a Simulation -- 6.4.4 Analyzing the Results -- 6.4.5 Detailed Results -- 6.4.6 Putting the Output into a Spreadsheet -- 6.4.7 Correlating Variables -- 6.4.7.1 Model Results with Correlated Variables -- 6.5 USING MONTE CARLO SIMULATION TO EVALUATE A COST-MANAGEMENT PROPOSAL -- 6.5.1 Establishing the Benchmark -- 6.5.2 Odd & Rich under Uncertainty -- 6.5.2.1 Operating Costs -- 6.5.2.2 Current Assets.

6.5.2.3 Current Liabilities -- 6.5.2.4 Gross Fixed Assets -- 6.5.2.5 Growth, Long and Short -- 6.5.2.6 Adding Monte Carlo Simulation -- 6.5.2.7 Measuring Risk Away's Promise -- 6.6 SUMMARY -- SECTION III: Introduction to Forecasting Methods -- CHAPTER 7: Forecasting: Time Trend Extrapolation -- 7.1 AN INTRODUCTION TO FORECASTING -- 7.1.1 Qualitative versus Quantitative Forecasts -- 7.2 STEPS FOR DEVELOPING A FORECASTING MODEL -- 7.3 TIME TREND EXTRAPOLATION -- 7.3.1 Estimation Period versus Hold-Out Period -- 7.3.2 Time Trend Extrapolation Using Linear Regression -- 7.3.2.1 The Constant-Change Model -- 7.3.2.2 The Compound-Growth Model -- 7.3.3 Assessing Model Validity and Accuracy -- 7.3.3.1 Evaluating Model Validity -- 7.4 EVALUATING FORECAST ACCURACY -- 7.4.1 Diagnostic Measures -- 7.4.1.1 Mean Error -- 7.4.1.2 Mean Absolute Deviation -- 7.4.1.3 Root Mean Square Error -- 7.4.1.4 Residual Standard Error -- 7.4.2 Combining the Estimation Period and the Hold-Out Period -- 7.4.3 The Last Step: Making the Forecast -- 7.4.4 Assessing Forecast Accuracy: Confidence Intervals -- 7.4.4.1 The Standard Error of the Forecast -- 7.4.4.2 The Critical Statistic -- 7.5 PROBLEMS WITH THE FORECASTING MODEL -- 7.6 SUMMARY -- CHAPTER 8: Forecasting with Econometric Models -- 8.1 DEVELOPING A STRUCTURAL ECONOMETRIC MODEL -- 8.1.1 Example: Speckled Band, Inc. -- 8.1.1.1 The Economic and Industry Context -- 8.1.2 Confidence Interval of the Forecast -- 8.2 SUMMARY -- CHAPTER 9: Forecasting with Smoothed Data -- 9.1 INTRODUCTION -- 9.2 MOVING AVERAGE -- 9.3 EXPONENTIAL SMOOTHING -- 9.4 EVALUATING THE MODEL -- 9.4.1 Making the Forecast -- 9.5 SEASONALITY AND SEASONAL DECOMPOSITION -- 9.5.1 Sources of Variation in Data -- 9.5.2 Seasonal Adjustment Factors -- 9.5.2.1 Estimating the Seasonal Adjustment Factors -- 9.5.3 Removing Seasonality -- 9.5.4 Forecasting Sales.

9.5.5 Review of Seasonal Adjustment -- 9.5.5.1 Cyclicality -- 9.5.6 The Final Forecast -- 9.6 SUMMARY -- SECTION IV: A Closer Look at the Details of a Financial Model -- CHAPTER 10: Modeling Long-Term Assets, Capital Budgeting, and Merger Decisions -- 10.1 FIXED ASSETS IN A LONG RUN PLANNING MODEL -- 10.2 DIRECT INVESTMENT EVALUATION -- 10.2.1 Investment Evaluation -- 10.2.2 The Invested Capital Method -- 10.2.2.1 Cost of Investment -- 10.2.2.2 Discount Rate -- 10.2.2.3 Cash Flow to Invested Capital -- 10.2.3 The Equity Method -- 10.2.4 Working Capital -- 10.3 EXAMPLE: EVALUATING AN INVESTMENT FOR STILIKO PLASTICS -- 10.3.1 The Details of the Investment -- 10.3.1.1 The Opportunity -- 10.3.1.2 The Objective -- 10.3.1.3 Financing -- 10.3.1.4 The Planning Horizon -- 10.3.1.5 The Constraints: Sales, Production, and Costs -- 10.3.1.6 Project Investment -- 10.3.1.7 Depreciation -- 10.3.1.8 Terminal (Salvage) Value -- 10.3.2 Constructing the Spreadsheet Model -- 10.3.2.1 Data Input -- 10.3.2.2 Data Processing Sheet -- 10.3.2.3 Initial Investment -- 10.3.2.4 Accounting Sections -- 10.3.2.5 Costs of Capital Section -- 10.3.2.6 Evaluation Sheet -- 10.3.2.7 The Invested Capital Method -- 10.3.2.8 Equity Method -- 10.3.3 Evaluating the Investment's Impact on the Firm -- 10.4 EXAMPLE: GENETIC SYSTEMS CORPORATION -- 10.4.1 Success and Failure in Pharmaceutical Research and Development -- 10.4.1.1 Conventional Analysis of the Project Net Present Value -- 10.4.1.2 Risk in the R&D Program -- 10.4.2 Monte Carlo Simulation of Project -- 10.5 MODELING MERGERS AND ACQUISITIONS -- 10.5.1 Overview -- 10.5.2 Modeling the Merger and Acquisition Problem -- 10.5.2.1 The Merger -- 10.5.2.2 Synergies -- 10.5.3 Monte Carlo Simulation -- 10.5.3.1 COGS -- 10.5.3.2 SG&A -- 10.5.3.3 R&D -- 10.5.3.4 Receivables and Inventory -- 10.5.3.5 Gross PPE -- 10.5.3.6 Accounts Payable.

10.5.3.7 Growth Rates.

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