Question 11.8: Can you work out the EVA^® for the second year of the busine...

Financial Management for Decision Makers

Can you work out the EVA $^{\circledR}$ for the second year of the business in Example 11.3?

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Question: 11.12

Centaur plc has five million shares in issue with a market value of £8.40 per share. The company has £14.2 million capital invested and EVA^® for the most recent year was £1.8 million. The required return from investors is 10 per cent a year. What is the percentage contribution to the market value ...

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Assuming no growth, PV of future EVA

^{\circ...

Question: 11.SE.4

Virgo plc is considering introducing a system of EVA^® and wants its managers to focus on the longer term rather than simply focus on the year-to-year EVA^® results. The business is seeking your advice on how a management bonus system could be arranged so as to ensure that the longer term is taken ...

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Virgo plc There is no single correct answer to thi...

Question: 11.SE.2

Aquarius plc has estimated the following free cash flows for its five-year planning period: ...

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Aquarius plc There are a number of ways in which t...

Question: 11.SE.6

Pisces plc produced the following statement of financial position and income statement at the end of the third year of trading: ...

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Pisces plc Adjusted NOPAT £m £m Operatin...

Question: 11.E.2

Aquarius plc has estimated the following free cash flows for its five-year planning period: ...

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There are a number of ways in which the accuracy o...

Question: 11.S-TQ.1

Romeo plc produced the following statement of financial position at the end of the third year of trading: ...

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Romeo plc Adjusted net assets (capital investe...

Question: 11.A.6

Can you think of another simplifying assumption that may be used to help calculate the terminal value? (Hint: Think back to the dividend valuation models in Chapter 8.) ...

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A constant growth rate beyond the planning horizon...

Question: 11.7

What can managers do in order to increase EVA^®? (Hint: Use the formula shown above as your starting point.) EVA^®=NOPAT- (R×C) ...

Verified Answer:

The formula suggests that to increase EVA

^{...

Question: 11.RQ.4

It has been argued that many businesses are overcapitalised. If this is true, what may be the reasons for businesses having too much capital and how can EVA^® help avoid this problem? ...

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If businesses are overcapitalised it is probably b...

Question: 11.RQ.3

Should managers take changes in the total market value of the shares (that is, share price × number of shares issued) over time as an indicator of shareholder value created (or lost)? ...

Verified Answer:

The problem with taking changes in the market valu...