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3 http://hedgeweek.com (HedgeMedia Ltd.). 4 Epstein, Adam, Vault Career Guide to Investment Management, Vault.com, July 2008. 5 Martinez, Mike‟ Vault Career Guide to Private Wealth Management, Vault.com, October 2006. 6 MBA Jungle (www.mbajungle.com), Industry Guides, Real Estate. 7 Ibid. 8 MBA Jungle (www.mbajungle.com), Industry Guides, Venture Capital, home page. 9 MBA Jungle (www.mbajungle.com), Industry Guides, Venture Capital/Private Equity. 10 Kaganovich, Oleg, James Currier, and Joe Bel Bruno, Vault Career Guide to Venture Capital, Vault.com, November 2008. Glossary
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Table of Contents Title Page Copyri
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Chapter 6 - Planning Capital Expend
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For Further Reading Part IV - Manag
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Successful Postmerger Implementatio
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This book is printed on acid-free p
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Syllabus How Chapter Topics in This
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Some of these experts are full-time
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About the Contributors Richard T. B
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Advances in Quantitative Analysis o
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enterprise development. Dr. Zachara
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The left side shows Nutrimin‟s in
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Gail, let‟s go over this balance
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Gail, do you have any questions abo
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11. Not all expenses are cash outfl
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Financial Statements: Who Uses Them
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profitability to keep investing for
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Financial Accounting Standards It i
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Downloadable Resources for this cha
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Next, we explain each of these thre
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liquidity. Or, more simply, achievi
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If these ratios are seriously defic
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The debt-to-equity ratio is evaluat
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year 1 to year 3. The net effect wa
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to rate of return on the equity. Th
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Other types of comparisons of finan
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income/sales), asset turnover (sale
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successful businesspeople should ha
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More than a decade ago, a special c
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companies is used for illustration.
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The identification of nonrecurring
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The Dow Chemical single-step income
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is a pretax measure, but income fro
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Sources: Companies‟ annual report
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Exhibit 3.11 Examples of discontinu
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amortization purposes, the Company
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Examples of nonrecurring items disc
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During Fiscal 2006, inventory quant
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The nonrecurring items of Boston Sc
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The disclosure presented earlier in
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gains or losses that appear as part
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ecurring as for Kimberly-Clark, the
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Summarizing Nonrecurring Items and
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This example of using the SEB works
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Exhibit 3.27 Other income (expense)
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Source: Pfizer, Inc., annual report
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Exhibit 3.30 Acquisitions note: Pfi
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Source: Pfizer, Inc., annual report
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Exhibit 3.33 Cost-reduction initiat
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Exhibit 3.36 Share-based payment no
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The Pfizer Worksheet Analysis: Down
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Some Further Points on the Pfizer W
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• It is common to treat items as
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FedEx Corporation (2007) First Sola
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1 The American Institute of Certifi
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28 These alternative translation me
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If you need some instruction in Exc
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To solve using Excel, open your Exc
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As you can see from the previous ex
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C6 = 5 • Now enter the “=” si
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Ordinary Annuity An ordinary annuit
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To confirm that the number of payme
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The FV of this first payment into t
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Exhibit 4.15 Finding the future val
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Exhibit 4.18 Finding the present va
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From Exhibit 4.20, we see that as t
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Exhibit 4.22 Amortization schedule
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Exhibit 4.25 Regular cash flows wit
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Internet Links For Further Reading
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Investors who are risk averse will
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considering the risk of a single as
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Portfolio Risk Stand-alone risk is
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In spite of unique or diversifiable
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If a particular stock is highly sus
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The formula tells us that, to begin
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for the entire market of stocks sin
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The dividend per share for preferre
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If you are able to determine the cu
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Debt finance is the lower-cost meth
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We don‟t observe many firms whose
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Capital Structure in Practice Finan
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are able to observe regularities in
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dividends and capital gains. We wil
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where EBIT is earnings before inter
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Since long-term debt holders have a
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accept more investment projects. Re
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A beer company is considering build
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accounts receivable, and tabulates
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profit by the tax rate determines t
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Accounting profit often mixes varia
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The concept that future cash flows
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Like project A, project C also cost
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The after-tax interest rate is the
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equal mix of debt and equity, its d
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The payback period rule stipulates
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The IRR rule is appealing in that i
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complete with its real options is g
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What does it matter that one invest
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Exhibit 7.3 Time line in dollars an
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There are a number of countries in
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eturn of 10% on its investments in
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Exhibit 7.12 Summary of exchange ra
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and so will the value of the liabil
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Source: CIA, World Factbook, availa
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Exhibit 7.18 Net present value of c
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equired interest payments to be pai
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So if the assistant treasurer was r
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This theory is far from perfect, as
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The Consulting Firm Jennifer, Jean,
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part by a statute, the Uniform Limi
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formation in Delaware (or any state
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purpose of requiring qualification.
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Phil‟s death may terminate the bu
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the transfer. This means that if Br
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These rules extend to tort liabilit
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In the absence of a meeting, stockh
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A more detailed discussion on the b
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Partnerships If possible, the resul
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associated with this arrangement ar
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Partnerships are also not separate
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For most start-up businesses, howev
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form, even at the risk of some unli
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likely that our consultants will be
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Thus, the corporation and LLC, with
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It is not possible to fully describ
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usiness corporation for all purpose
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a cash-basis taxpayer to be taxed a
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The Tax Reform Act of 1986 substant
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limit is the product of the value o
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he would have spent anyway. In fact
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protect Brad from the scenario of h
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paying for the privilege. If the st
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The second tax scenario attaches to
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include that nullity in his taxable
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then the capital gain to be taxed h
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Most relevant to Morris is Section
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To begin with, the ESOP will have t
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general partner of a limited partne
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small businesses) is also subject t
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oth Lisa and Brad would be free to
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Assume that a limited liability com
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corporations, and had been audited
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There is plenty of blame from the c
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• An important study about top ma
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• The federal government made at
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$79.7 million for other services, a
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Budgets offer a variety of benefits
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determine the impact of specific pr
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Exhibit 11.2 Budget variance report
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udget, we just add more to it next
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income statement. The financial bud
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For a manufacturing company, cost o
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C&G‟s Gift Shop has a policy to m
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Meeting cash obligations as they co
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was unusually low, say, due to the
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A fixed budget, sometimes called a
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A large part of the budget selling
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• Centralized resource allocation
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Merewitz, Leonard, and Stephen H. S
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This chapter starts with a discussi
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Interestingly the numbers for quart
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Exhibit 12.4 Scenarion analysis.
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Pitfalls Although this analytic tec
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Exhibit 12.6 Variable cost element
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Variable Cost as a Function of Outp
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If scenario 2 yields a lower profit
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Microsoft certainly does not price
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If it is determined that dumping ha
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Leaving government agencies and not
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transaction processing. Each proces
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Exhibit 13.3 E-commerce transaction
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To summarize the analysis, the busi
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Capacity costs are probably the mos
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which it was, but for the inventory
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They called this strategic cost man
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A closer study, however, revealed s
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the benefits of business planning.
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The last type of plan is called a d
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The Business Plan We will progress
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Hook the Reader That means having t
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Industry The goal of this section i
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upscale suburban client who wants p
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Company and Product Description Com
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Exhibit 14.8 shows the competitive
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Exhibit 14.9a Advertising schedule.
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Scope of Operations What is the pro
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Development Time Line A development
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By law, most organization types req
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As mentioned in the development pla
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that can be depreciated, you should
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1 Special thanks to Matt Feczko, Mi
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For better or worse, the business e
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Leeson bet and lost. Japanese stock
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Between February and April 1994, Da
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LTCM could be picky when it came to
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An investor who wished to invest in
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Similarly, the swaps market has rev
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speculator would suffer losses equa
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American manufacturer will suffer l
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The ease with which futures facilit
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Exhibit 15.1 Call option payoff dia
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Exhibit 15.2 Payoff diagram for a w
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Notice that the put option payoff r
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Bank, owns a large block of NASDAQ
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can be tailored so that the money r
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Finally, the last step is to choose
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3 Fischer Black, who co-invented th
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not include assets that the firm ha
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Thus, a business valuation will usu
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Negative • Acme is highly depende
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Exhibit 16.3 Acme Manufacturing, In
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Profitability ratios reflect the re
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When we talk about the value of a b
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This example illustrates that with
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Income Approach: Discounted Cash Fl
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Exhibit 16.5 Acme Manufacturing, In
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Victoria explains that the second p
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Victoria analyzes Acme‟s audited
Page 461 and 462:
In summary, the discounted cash flo
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Adjustment for Illiquidity As previ
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51% position sells for a higher pri
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examples. The proper application of
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The subject of this chapter is grow
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Finally, an acquisition can be effe
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M&A activity has been the focus of
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companies continue to make the same
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equals was taking on a distinctive
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Anatomy of a Successful Acquirer: T
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employees kept their original jobs
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where ΔCF t is the incremental cas
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where it‟s ultimately buried. Suc
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The following example summarizes th
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make sure that you are at least awa
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acquisition, there is no immediate
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its vascular business, which was so
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While all employees should be part
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makes strategic and financial sense
Page 501 and 502:
Bhagat, Sanjai, Ming Dong, David Hi
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The 2008 financial crisis underscor
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Source: Plunkett’s Outsourcing &
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To summarize: Trends • Large numb
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Companies are becoming increasingly
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What steps should a company follow
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• Results of meetings with vendor
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• Breach of contract and remedies
Page 519 and 520:
Assuming the project or service rev
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The answer is: profits. The company
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19 Information Technology and You D
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People‟s lives have been turned u
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its self-contained rechargeable bat
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Random-Access Memory (RAM) Random-a
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On laptop computers and PDAs, the s
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Operating System An operating syste
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the spreadsheet software together w
Page 539 and 540:
Exhibit 19.5 Pro forma sales and in
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Database Software A database is a c
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Internet e-mail addresses often con
Page 545 and 546:
Personal Finance Software There are
Page 547 and 548:
There are several different approac
Page 549 and 550:
One of the major attractions of the
Page 551 and 552:
While not a new version of the Web
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industrial revolution, and has occu
Page 555:
Dummies Inc. has a series of books
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organization. This chapter is desig
Page 561 and 562:
As technology has evolved, the term
Page 563 and 564: While the software mentioned earlie
Page 565 and 566: Most of the focus of the investor c
Page 567 and 568: Data Access and OLAP Before the lat
Page 569 and 570: Exhibit 20.5 illustrates a differen
Page 571 and 572: Productivity Tools Workers expect t
Page 573 and 574: Client-server technology is based o
Page 575 and 576: Today, most programmers write in C+
Page 577 and 578: Exhibit 20.6 is a model of a typica
Page 579 and 580: No treatment of relational database
Page 581 and 582: Online analytical processing (OLAP)
Page 583 and 584: server) and the rest on the users
Page 585 and 586: the other operational departments w
Page 587: The world of business has changed d
Page 591: Chaffey, Dave, E-Commerce and E-Com
Page 595 and 596: According to the results of the sur
Page 597 and 598: understand the financial situation
Page 599 and 600: MBA graduates who are hoping to ent
Page 601 and 602: Summary Financial services opportun
Page 603 and 604: Let‟s begin with the “I left it
Page 605 and 606: MBA student: “Well, I go to [Grea
Page 607 and 608: Aiming for Your Goals For career ch
Page 609 and 610: Networking is generally regarded as
Page 611 and 612: Let‟s begin with some key assumpt
Page 613: like, or moving ahead in the compan
Page 619 and 620: financial expertise. The purpose of
Page 621 and 622: Cost approach: A general way of est
Page 623 and 624: Fair market value: The price, expre
Page 625 and 626: Internal control: The policies and
Page 627 and 628: Multistep income statement: An inco
Page 629 and 630: Psychographic data: Information tha
Page 631 and 632: Tax-adjusted nonrecurring items: Pr
Page 633 and 634: Accounting systems Accounts payable
Page 635 and 636: American Institute of Certified Pub
Page 637 and 638: Audit firms‟ conflict of interest
Page 639 and 640: udgeted accounts payable budgeted a
Page 641 and 642: Buildup method Built-in gain Burn r
Page 643 and 644: taxation transferability of interes
Page 645 and 646: standards three approaches to value
Page 647 and 648: Capital structure bond valuation ca
Page 649 and 650: Cash-basis taxpayer, accounts recei
Page 651 and 652: Classification Clayton Act of 1914,
Page 653 and 654: limited liability companies limited
Page 655 and 656: Cost of capital Cost of debt Cost o
Page 657 and 658: Cross-border deals Cross-docking Cr
Page 659 and 660: Decision rules Decision support sys
Page 661 and 662: Discontinued operations note Discou
Page 663 and 664: Domain name servers (DNS) Domestic
Page 665 and 666:
uy-sell agreements family limited p
Page 667 and 668:
Financial advisor position Financia
Page 669 and 670:
Forecasting Forecasts Forecasts and
Page 671 and 672:
Gain vs. loss Gantt chart Gap analy
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central processing unit (CPU) hard
Page 675 and 676:
Independent CPA Index of Economic F
Page 677 and 678:
estatements of previously published
Page 679 and 680:
Irregular cash flow IRS Form 1040 S
Page 681 and 682:
control conversion to formation, of
Page 683 and 684:
hardware software Margin analysis M
Page 685 and 686:
Microsoft Outlook Microsoft PowerPo
Page 687 and 688:
associations careers in finance e-c
Page 689 and 690:
Objectives Object-oriented programm
Page 691 and 692:
Other income (expense) note Out-of-
Page 693 and 694:
Payback period Payment card industr
Page 695 and 696:
Pooling of interest method Porter
Page 697 and 698:
Private wealth management Privilege
Page 699 and 700:
Quantify the material Quantity vari
Page 701 and 702:
Revenue enhancement Revenue growth
Page 703 and 704:
Security market line (SML) Segment
Page 705 and 706:
networks and communication open sou
Page 707 and 708:
Stock transfer Story model Straddle
Page 709 and 710:
Takeovers Tangible goals Target Tar
Page 711 and 712:
Tax savings Tax shelters Tax shield
Page 713 and 714:
centralized resource allocation fin
Page 715 and 716:
private wealth management. venture
Page 717:
World Factbook (CIA) World Wide Web
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