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Case 25 HARIMANN INTERNATIONAL Harimann International Company was established in Delhi by Vikram Dhawan in May 1990.

It worked as manufacturer and exporter of finished textiles, which were primarily table lines and woman clothes. Indian government offered variety of incentives to the company for its effort to export the goods in different countries. Whenever goods were exported to one of the several-targeted countries, any profits from the sales were accorded tax-exempt status. In addition, the company got the facilities like duty drawback, cash compensatory support and replenishment licenses. During the first year of operation, the company had limited its business to brokering linen household goods. The nine months were slow because customers were few and orders were small. However, toward the end of the year, a particular style of hand-embroidered table linen became very popular, sales were excellent, and goal of the first year was achieved. In May 1991, Dhawan, company President, added womens blouses and skirts to his product line in response to requests by satisfied customers. Thereafter the business grew quickly. The Pioneer Trading Company, a larger importer, was one of the Dhawans first customers and had been a regular customer ever since. At the end of January Pioneer had requested to Harimann for the samples of six styles of garments along with a preliminary order should the samples and prices prove satisfactory. Harimann had prepared the samples within a week and sent through courier, with their respective prices. Several weeks later Dhawan received the order from Pioneer for all six styles, conditional on Harimanns ability to make minor changes to three of the styles and to meet a shipping date of April 6. This order was attractive opportunity for Dhawan because Indian government was encouraging exports to Japan, and, as a result, the profits from the Pioneer contract would be tax-free. Moreover, if receipt would... While assessing Star River Electronics current financial health and recent financial performance, I used many measures of the companys ability to service financial obligations as well as classical measures of financial performance. The companies ROA, which measures how well the company uses its assets to generate earnings, decreased by 6.9% since 1998. This indicates that the company is not using its assets efficiently. The firms accou nts payable and accounts receivable have both been increasing which is most likely the reason for the companys increased borrowing. The increased borrowing and shortages of cash can cause major financial problems for Star River in the future as the company also needs capital expenditure in the future regarding new packaging equipment. Overall, the companys financial position is hazardous and weak. It also seems as though the company will become even weaker if it decides to borrow money to acquire the new equipment. I would have to say that sales are one of the major key assumptions of the firms financial performance. This is because so many of the other assumption are based on percentage of sales (e.g. selling expenses, production costs, and inventories). Adeline Koh thinks that it is reasonable to assume that a 15% year over growth is expected. I believe that this is a risky assumption by her because the market is obviously moving away from CD technology to DVD technology. With that being said, Star River Electronics has almost no capacity to support the DVD demand without making alternate manufacturing investments. CAPM: r_e = r_f + (r_m r_f) r_e = 3.6 + 1.4 (9.6 3.6) r_e = 12% WACC = (.8594) (12) + (.1406) (1-.245) (6.62)WACC = 11.02%One of the largest assumptions in the calculation of WACC was to use the CAPM to derive the cost of equity. Within the CAPM, I also made an assumption of the companys beta by averaging Sing Studios, Inc.s and STOR -Maxs betas to obtain the beta I used for Star... [continues]