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22 Cards in this Set
- Front
- Back
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Effective corp gov systems share |
1 define rights of shareholders and stakeholders 2 clearly identify mgr and director responsibilities 3 provide fair and equitable treatment between mgr, directors,shareholders 4 have complete transparency and accuracy in disclosures |
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Effective corp tax on divs |
1+corp tax + ((1-corp tax)*ind tax) |
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avg spread btween AAA and BBB bonds |
100 bps |
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Percent of directors should be independent |
75% |
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Nominating committee should be entirely independent |
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Audit com should be entirely independent with at least 2w/ financial or accounting experience |
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Pe firms add value by |
1. Ability to reengineer protfolios(ex execs who have experience) 2. Better debt financing terms 3. Better alignment of interests between mgmt and equity ownership |
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Tag or drag along clauses |
Offer for acquisition must go to all shareholders |
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Priortity in claims |
PE firms receive distribution before other owners |
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Earn out |
Mostly by VC. Tie acquisition price to portfolio companies future performance |
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6 ways to value PE portfolio companies |
1.DCF 2. Relative value or market (mulitplies like P/E 3. Real option analysis.(immature with flexible future) 4. Replacement cost 5. Venture capital 6. LBO |
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Lbo 3 inputs |
1. Targets Cf 2. Expected returns to financiers 4. Total amt of financing |
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Exit value |
Investment cost+ earnings growth + increase in price multiple + reduction in debt |
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Real option value always positive |
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One of most critical activity to assess good corp gov...check quality and quantity of financial info |
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Kantian suggest people deserve more weight than other inputs |
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Anti trust action if merger based on hhi |
<1k never 1k-1.8k. If 100 or more change >1.8k if 50 or mire change |
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If given 3 countries and 3 options of cap structure. Calculate wacc for all 3. If wacc stays same it is MM w/no taxes. If Wacc goes down then up is isbstatic trade off(optimal debt level was found and then it went too far). If wacc goes down as debt goes up it is MM with taxes. (If cod stays the same static is eliminated as ni financial distress) |
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Reasons for share repurchase include -implement Residual income while lowering perceived risk - can offset dilution of shares to employees More |
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2 diff between accounting income and economic income |
Accounting base on depreciation onnoriginal investment and EI based on market value 2. CoD subtracted from NI while financing costs for EI are in discount rate |
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Dividens = |
NI - equity portion of capital budget |
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If buying back 600k shares at 50 per share with cod of 4% what is debt to subtract from earnings |
600*50*.04 |
