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You have seen the word greed come up in the videos. You have seen Gordon Gekko explain the benefits of greed and Milton Friedman as well. Friedman makes you think about greed in ways you probably have not. Greed seems to come with a negative connotation but should it? So it is your chance to answer the question is “greed good”? Explain and provide an applicable example as part of your explanation.
It is highly recommended that you submit your initial post the 4th day of the module week. After your initial post, be sure to reply to at least two of your classmates by the end of the module week.
Review the Discussion Rubric for detailed grading criteria.
Note: Discussion rubrics may be accessed by selecting the gear icon above and choosing “show rubric” from the drop-down menu.
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P/E ratio is used regularly as a valuation metric and you will often hear it discussed in the business news media (i.e. CNBC, Bloomberg, Fox Business, etc). You have just had the opportunity to apply P/E in a relatively easy assignment. Based on this assignment and other valuation techniques used in this class what do you think about the use of P/E? Easy? Good idea? Would you rely on it for your valuation purposes? Any other thoughts?
It is highly recommended that you submit your initial post the 4th day of the module week. After your initial post, be sure to reply to at least two of your classmates by the end of the module week.
6.5 – Discussion
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discussion3.jpgThe supplemental materials describe the process of calculating WACC Preview the documentView in a new window (PDF) and go on to apply the results to valuing a firm both unlevered (no debt) and levered (debt). The levered firm is shown to be more valuable. Two identical firms (see the supplemental materials) and the firm with debt is more highly valued. Does this make sense? Why or Why not? Why not use 100 percent debt financing if debt increases value?
It is highly recommended that you submit your initial post the 4th day of the module week. After your initial post, be sure to reply to at least two of your classmates by the end of the module week.
7.5 – Discussion
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discussion3.jpgIn Activity 6.2.4 you were exposed to the Cost
of Capital by Sector (Links to an external site.). One of the columns provides the percentage of
debt financing by industry (D/(D+E)).
There are several industries with low percentages of debt
financing. Take a look and identify some
with a low percentage of debt financing and do the same with firms that have a
high percentage of debt financing (the average according to the data in the
link is about 42 percent).
Note: Do not use the banking financial services industries.
Based on the types of firms that use a small amount of debt
and those that use higher amounts of debt, what can you conclude? What is it about the firms that use low
amounts of debt? More debt would lower
their cost of capital so what is holding these firms back form taking on more
debt? You need to think a little, do
not simply say the firms with low debt are all in industry x or industries
similar to x. That is obvious, what is
the economic intuition? What is the
story?
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Should firms hedge? A number of firms practice hedging and use derivatives to manage risk and change risk exposure. Some people argue firms should stick with their core business (i.e airlines should concentrate and on operating airlines). What do you think, should firms hedge? Why or why not?
It is highly recommended that you submit your initial post the 4th day of the module week. After your initial post, be sure to reply to at least two of your classmates by the end of the module week.
