Explain what is meant by the term corporate governance

Assignment Help Financial Management
Reference no: EM131055330

Q1. Explain what is meant by the term "corporate governance". Recently, a scandal involving Volkswagen was revealed. Based on your knowledge of corporate finance, critically assess what has happened to the value of Volkswagen since the emissions scandal was uncovered. Why do you believe the value has changed and what impact this might have on the corporate governance policies of Volkswagen going forward? How can Volkswagen mitigate the risk of events such as this one occurring in the future?

Q2. If a bond with a face value of €1,000 and a coupon rate of 7% is currently selling for €1,046, what does that tell you about the current yield to maturity of the bond relative to the bond's coupon rate? Explain why this is the case.

Q3. Matt Berry owner of Berry Gold Mining, is evaluating a new gold mine in Tanzania. Meg Little, the company's geologist, has just finished her analysis of the mine site. She has estimated that the mine would be productive for eight years, after which the gold would be completely mined. Meg has taken an estimate of the gold deposits to Kevin Marshall, the company's financial officer. Kevin has been asked by Matt to perform an analysis of the new mine and present his recommendation on whether the company should open the new mine. Kevin has used the estimates provided by Meg to determine the revenues that could be expected from the mine. He has also projected the expense of opening the mine, and the annual operating expenses. If the company opens the mine, it will cost £500 million today, and it will have a cash outflow of £80 million nine years from today in costs associated with closing the mine and reclaiming the area surrounding it. The expected cash flows each year from the mine are shown in the following table. Berry Gold Mining has a 12 per cent required return on all of its gold mines.

Year Cash flow (£)
0 -500,000,000
1 60,000,000
2 90,000,000
3 170,000,000
4 230,000,000
5 205,000,000
6 140,000,000
7 110,000,000
8 70,000,000
9 -80,000,000

Should this project be accepted? Use three investment evaluation techniques to arrive at your answer. Explain your recommendation fully. In analysing the mine, Kevin advises Matt that this mine is riskier than other mines in the Berry Gold Mining portfolio and so the discount rate should increase. What impact will this have on the cash flows of the project?

Verified Expert

This assignment deals with highlighting the concept of corporate governance and linking it to a real life example of Volkswagen. In addition, it also has a question around the concept of yield to maturity for a bond and its relation to the coupon payments. Finally, there is a capital budgeting problem requiring to evaluate the proposed investment.

Reference no: EM131055330

Questions Cloud

Network management in low power wireless networks : Prepare a thesis on given topic. Thesis topic is network management in low power wireless networks
Analyze the company''s strategic approach to globalization : Explain the company's capacity to be able to fulfill strategic missions while increasing profit margin
Developing a list of good alternatives involves creativity : Developing a list of good alternatives involves creativity and avoiding preconceived attitudes (knee-jerk solutions) and assumptions.
Vectors and the dot product : The purpose of this assessment is to help you determine whether you have a clear understanding of vectors and dot products. Answer the following questions to complete this exercise:
Explain what is meant by the term corporate governance : Why do you believe the value has changed and what impact this might have on the corporate governance policies of Volkswagen going forward? How can Volkswagen mitigate the risk of events such as this one occurring in the future?
Develop a procedure for gather data prior to decision making : Develop a procedure for gathering data prior to decision making. Select a problem from either: Performance Management or Compensation Case.
Critically explain the three forms of restructure : "Critically explain the three forms of restructure. In your answer detail why firms restructure, giving a comprehensive example for each form. Provide an explanation of the errors firms should avoid when restructuring. You should include reference..
What must be the dividend yield : Shares of common stock of the Leafpad Co. offer an expected total return of 8.9 percent. The dividend is increasing at a constant 2.2 percent per year. What must be the dividend yield?

Reviews

Write a Review

 

Financial Management Questions & Answers

  About the compound interest

Compound Interest. Old time savings bank pays 4% interest on its savings accounts. If you deposit $1,000 in the bank and leave it there: how much interest will you earn in the first year? how much interest will you earn in the second year?

  Project being considered has normal cash flows

Which of the following statements is CORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows.

  Difference of wacc based on market value

What is the difference of WACC based on market value weights and book weights - Please show formulas.A balance sheet shows a total of noncallable $45 million.

  Total cost is used to determine the price

Sosa Company has $39 per unit in variable costs and $1900 per year in fixed costs. Demand is estimated to be 138,000 units annually. What is the price if a markup of 35% on total cost is used to determine the price?

  Affect the business risk of a firm-optimal capital structure

Which of the following does NOT affect the business risk of a firm? According to the trade off model of capital structure, which is true at the optimal capital structure? The Price Co. can make widgets for $5 and sell them for $8. If fixed costs are ..

  Estimate the economic capital using a one-year time horizon

Suppose that daily gains (losses) are normally distributed with standard deviation of $5 million. (a) Estimate the minimum regulatory capital the bank is required to hold (assume a multiplicative factor of 4.0). (b) Estimate the economic capital usin..

  Use residual dividend policy to determine annual dividends

Suppose that Metrick, Inc. has a capital budget for the upcoming year of $100 million and it expects net income of $80 million. The company’s optimal capital structure is 40% debt and 60% equity. If Metrick follows a residual dividend policy, what wi..

  Calculate the nominal required rate of return for mercury

Calculate the nominal required rate of return for mercury inc, assuming that investors expect a 0.7% rate of inflation in the future. The real risk rate is equal to1.0% and the market risk premium is 4.8% .mercury has a beta of1.5. Mercury's realized..

  Lesser responsibility for maintaining ethical corporate

Does the financial manager have a greater responsibility or a lesser responsibility for maintaining ethical corporate governance? Why or why not? What is your approach to ethical corporate governance?

  Pension funds have an accumulated value

Betty Bronson has just retired after 25 years with the electric company. Her total pension funds have an accumulated value of $280,000, and her life expectancy is 16 more years. Her pension fund manager assumes he can earn a 12 percent return on her ..

  Face budgetary challenges on continual basis

Today, many companies face budgetary challenges on a continual basis. Two critical aspects that businesses lack are effective control practices and monitoring. What must happen in order for the company to succeed? What are the company’s most vulnerab..

  What the costs of the revco bankruptcy

Revco Drug Store filed for bankruptcy in July of 1988 and was one of the largest bankruptcies in US financial history as well as being one of the largest leveraged buyouts. what the costs of the Revco bankruptcy will be, and how long you expect befor..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd