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by: Cruz Murray III


Cruz Murray III
GPA 3.77

Stanmore Marshall

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Stanmore Marshall
Class Notes
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This 4 page Class Notes was uploaded by Cruz Murray III on Saturday September 26, 2015. The Class Notes belongs to FIN 362 at James Madison University taught by Stanmore Marshall in Fall. Since its upload, it has received 65 views. For similar materials see /class/214005/fin-362-james-madison-university in Finance at James Madison University.




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Date Created: 09/26/15
Study Guide for Test 1 Will provide Table 25 information except for 7 ratios see Class 2 Overview Quizzes Quiz 1 Omitted Quiz 2 all 3 sections amp Quiz 3 the same for each of the 3 sections Quiz 1 omitted Chapter 1 Skip it Chapter 2 Mainly rely on quotChapter 2 Reader s Guide for material down to page 63 From page 63 through page 71 my lecture notes and questions basically reinforced the author s analysis of SMG Problems 1 2 and 7 Chapter 3 Focus only on the forecasting example of RampE Supplies consistent with quiz from pages 89 98 Understand this forecasting method and its relationship to the identity method and the determination of the loan needed given the EFR Chapter 4 We actually did not use Chapter 4 but simply talked about the concept of sustainable growth rate in class expressed as SGR ROE X b where b is 1payout ratio We also discussed the SGR within the context of REITs Chapter 5 The reading was for pages 153 through 162 Most of this material was reinforced with Power Point slides 121 We also referenced EQY s bond issue and its pricing via FNRAorg relating this information to the characteristics of bonds versus the characteristics of stocks We also determined the semiannual yield and the conversion to an annual yield The Class 9 Overview posed 3 questions about EQY bonds versus EQY stocks Problems 1 2 and 10 Chapter 6 Financing the firm 0 Tables 61 62 63 0 Equation specifying the relationship between ROE ROIC and the cost of debt 0 General understanding of Higgins 5 factors See Figure 63 on page 218 Equity One Questions Questions on the Earnings transcript responsible for concepts in the Class 3 Overview Notes provided below Supplemental forJune 30 2011 Responsible for questions provided in Class 5 Overview Responsible for notes from Langer Interview on performance Notes in Class 7 on BB Readings in the nancial press Testing format for CFO readings Answers provided below Test questions in Class 3 revised Overview AIG article questions in Class 4 revised overview Notes also below Not responsible for Business Week article regarding Private Equity as possible purchasers of AOL CFO articles quotYou own risksquot l quot What is meant by a company that is a part of a private equity portfolio A private equity company owns this particular company and plays a role in overseeing the company s decisions The term quotportfolioquot points to the fact that private equity firms own several companies which comprise the portfolio A primary condition affecting the CFOs decision making is the time horizon ofthe private equity company that is the time period that the private equity company target for holding the company The time horizon for private equity companies a tends to be roughly the same time period b can differ considerably among private equity companies Which firm would typically provide better training for a finance employee a Publicly held company b Private equity portfolio company c Private company Think Again IBM resurgence P 9quot 8 The CFO for IBM referred to the reverse bell curve as indicated by the cover pages on a wellknown magazine Identify the magazine and what is meant by a quotreverse bell curve A bell curve from right to left starts low peaks and then decreases to a minimum IBM s performance as measured by Fortune Magazine covers was strong in 1984 praised low in 1992 a dinosaur and strong again in 2006 IBM39s revenue mix has shifted from hardware 35 of revenue in 2000 down to 17 of revenue in 2010 to so ware and services 65 up to 83 The expectations for performance remained high during the recession because a large part of IBM s business is quotannuitybasedquot What is meant by l39annuitybasedquot Annuitybased in this case means an ongoing cash flow stream instead of the older model where the hardware was delivered and then there was minimal need for IBM Between 2006 and 2010 IBM39s EPS has increased from 605 per share to 1152 per share The article indicates this is a 17 CAGR What is meant by each letter in the acronym What is the formula that determines a 17 CAGR Compound annual growth rate The model determining the value is 605 X 1Rquot4 1152 We then solve for R which we did in class Here s the solution in detail 605 x 1Rquot4 1152 1Rquot4 1152605 1904 1R 1904quot14 11747 R 1747 Taking the Next Step 9 Distinguish between mentorship and sponsorship Mentorship is more advisory whereas sponsorship implies a more active role such as contacting colleagues and pushing the hiring of the mentor 10 The article addressed the quotglass ceilingquot for women in publicly traded corporations What position did the article focus on The CFO position Vanessa Wittman CFO of MMC summarized the perspective that was most effective for decision H H makers in finance as quotan awareness ofgender issues with a genderblind mentality for promotion issuesquot Explain what is meant by this awareness The awareness of the conditions a woman faces in the specific environment however promotion is not influenced by awareness of these issues per se but by qualification for the job Notes on AIG article in WSJ Firms who underwrote May Stock sale and then analysts at the firm wrote quotbitingquot reports on AIG 14 billion settlement with 10 security firms And under the 2003 settlement financial firms are barred from altering their research ratings in a bid to win business an analysis of which buyers in AlG39s May offering ended up holding the shares and which ones quotflippedquot or quickly sold them after the deal the person said AIG closed at 23 a share on Thursday roughly half of the company39s book value or assets minus liabilities per share So far the bears have been right AIG shares since the May offering have slid 21 compared with a 12 decline in the stock market and 23 for a basket of insurance stocks AIG closed at 23 a share on Thursday roughly half of the company39s book value or assets minus liabilities per share Broadly analysts rarely place a quotsellquot rating on company that is a client of their securities firm by research firm Capital IQ On Wall Street some investors read quotneutralquot recommendations as a reason to avoid a stock JP Morgan analystJimmy Bhullar who has a quotneutralquot rating on AIG and a 32 price target said in a report that he expects AIG to fall short of its 2015 profitability target adding that the insurer39s returns quotare likely to remain well below peer levels for the foreseeable futurequot The 2015 pro tability target is referred to as guidance The US Treasury still owns 77 of AIG and effectively paid 2873 a share for its AIG stake or 417 billion for what it still holds Mr Benmosche repeatedly has told bankers and investors that the company won39t sell the Treasury39s shares cheaply and needs to earn a profit on the sales for US taxpayers The next offering could be in November but the timing will depend on the market price of AlG39s stock Lead underwriters will be picked as the sale nears EQY Supplemental June 30 2011 Supplemental Page 4 A company employs a leveraged recap basically increasing its debt and using the proceeds to buy back equity Assets are not changed by the recap The recap will reduce EBITDA True or false see page 14 for more information The recap will reduce FFO True or false see page 15 for more information Page 5 The revenues for 3 months ended June 30 2011 was 25 greater than the revenues for the 3 months ended June 30 2010 What was the main contributor Page 6 Total assets increased by 614MM from Dec 31 2010 to June 30 2011 Was most of this increase from debt or from equity As a creditor does the increase in debt bother you The presentation of most balance sheets starts at cash Note how EQY s presentation differs Pages 6 amp 7 Compare the equity market capitalizationbook value of equity for June 30 2011 and Dec 31 2010 I ll discuss in class Page 8 Note the percentage of variable rate debt How does this proportion affect your view of EQY s risk Page 9 Note the jump in the debt maturity schedule in 2014 Is the amount a concern Pages 10 amp 12 Where would interest from the mezzanine loan appear Why might an analyst want to have the discontinued operations separated out Page 13 Refer to property operating expenses What expenses are not part of property operating expenses see income statement on page 10 Why the sizable drop between NOI and sameproperty NOI Page 17


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