explain in short details please
75. Regarding the WACC that has to be applied to a project, should it be an expected return, an opportunity cost or the average historical return on similar projects? 76. Could we assume that, as we cannot predict the future evolution of the value of shares, a good approximation would be to consider it constant during the next five years? 77. The reasonable thing to do is to finance current assets (collections, inventories..) with short-term debt, and fixed assets with long-term debt. Is this correct? 78. Is the market risk premium a parameter for the national economy or for the world economy? 79. The market risk premium is the difference between the historical return on the stock market and the return on bonds. But how many years does "historical" imply? Shall we use the arithmetic mean or the geometric one? 80. We are valuing a company, a lot smaller than ours, in order to buy it. As that company is a lot smaller than ours it will have no influence on the capital structure and on the risk of the resulting company. This is the reason why I believe that the beta and the capital structure which are relevant to the valuation of the company we are analyzing are the ones of our company. Am I right? 81. Our company (A) is going to buy another company (B). We want to value the shares of B and, therefore, we will use three alternatives of the structure Debt/Shareholders' Equity so as to obtain the WACC: 1) present structure of A; 2) present structure of B, and 3) structure used by A to finance the acquisition of B's shares. We will value the company B by applying these three alternatives and then take as a reference the average of the results. Is this correct? 82. When valuing the shares of my company, I calculate the present value of the expected cash flows to shareholders and I add to the result obtained cash holdings and liquid investments. Is that correct? 83. I think the Free Cash Flow (FCF) can be obtained from the Equity Cash Flow (CFac) by using the relation: FCF - CFac + Interests - AD. Is this true? 84. Is the relation between capitalization and book value of shares a good guide to investments? 85. Does it make any sense to form a portfolio comprised of companies with a higher return per dividend? 86. A financial consultant is valuing the company I set as an objective (an entertainment centre) by discounting the cash flows until the end of the dealership at 7.26% (interest rate on 30-year-bonds = 5.1%; market premium = 5%, and Beta = 0.47%). 0.47 is a beta provided by Bloomberg for Kinepolis (the company whose activity is the management of several cinemas in the EU), in function of the Dax Index. Is it correct to use the beta of Kinepolis in this valuation? 87. I am confused because I see different formulae to lever and unlever betas in different books (Damodaran, Mckinsey, Brealey & Myers ..). Which is the correct one?60. What is a 3 x 1 Split? 61. A court assigned to me (as an economist and auditor) a valuation of a market butcher's. The butcher's did not provide any simple income statements or any valuable information which I could use in my valuation. It is a small business with just two employees, the owner and an apprentice. This type of tax system exempts them of certain commercial and fiscal informative statements. I think it is very important to underline that the object of the valuation is not a company, but rather a business, a work position. Although it has recurrent customers the value of its tangible assets is solely the value of its tools, as the premises are rented (I think it is impossible to value the intangible asset that is the work). Obviously, discounting cash flows in not an appropriate method in this case. Actually, I do not know which profession fits better the job that the court assigned to me. 62. What repercussions do variations in the price of oil have on the value of a company? 63. How can an auditor spot acts of creative accounting? I mean, for example, the excess of provisions or the non-elimination of intra group transactions with value added. 64. I heard talk of the Earnings Yield Gap ratio, which is the difference between the inverse of the PER and the TIR on 10-year-bonds. It is said that if this ratio is positive then it is more advantageous to invest in equity. How much confidence can an investor have in such an affirmation? 65. I have a doubt regarding the Enron case. How could such a prestigious investment bank advise investing when the quotations of the shares were falling? 66. Is the following affirmation of an accountancy expert true? "The valuation criterion which reflects the value of the shares of a company in the most accurate manner is based on the amount of the shareholder's equity of its balance sheet. Stating that the value of a company's shares equals its book value is a valid argument." 67. Could we say that goodwill is equivalent to brand value? 68. Could we say that the value of shares is intangible? 69. When calculating the WACC, is the weighting of the debt and the shares done with book values of debt and shareholder's equity or with market values? 70. The market risk premium is the difference between the historical return on the stock market and the risk-free rate, for every year. Why is it negative for some years? 71. Is it correct to use in the valuation of the shares of a company the "value of the real net assets" which, according to the Institute of Accounting and Auditing (ICAC), represents the "book value of shareholder's equity, corrected by increases or decreasing in value which could be demonstrated, in the case of the goods, rights and obligations of the company at the reference date?' 72. Is it correct to say that the value of the shares is the "value of the results' capitalization" which, according to the Institute of Accounting and Auditing (ICAC) represents "the sum of the expected future results of the company during a certain period, discounted at the moment of the valuation?" 73. Is it true that a company creates value for its shareholders during a year if it distributes dividends or if the quotation of the shares increases? 74. The ROE (Return on Equity) is the ratio between net income and Shareholders' equity. The meaning of ROE is return to shareholders. Consequently, is ROE a correct measurement of the return to shareholders
