my_finance_professor

BAM !!! Nvidia -17% Markets were bleeding yesterday. And, not only Nvidia: SMCI -13% Oracle -15% ARM -12% ASML -7% C3.ai -7% The tech sector reacted heavily on the news of DeepSeek, a Chinese start-up in the AI sector. This Chinese firm released an AI model last week that seems to perform at least as good as the current AI models, but a much lower cost. Rumors are that this AI model even outperforms models such as ChatGPT. The model seems to be developed in a much shorter time and at a price tag of millions instead of billions. On top, the model will be open source. The next couple of weeks and months will show whether the rumors are entirely true. If they are, this is a major event and a very serious competitor and threat to the dominant US AI models. But, even if it is not completely true, it does not matter. The news planted a seed in the heads of investors. Are those very high valuations of AI companies warranted? Will they be able to meet those very high expectations? So investors drove many stock prices of firms banking on the AI wave south. Is this the end of a so-called AI bubble? What do you think? #AI #Nvidia #DeepSeek #GenAI #Oracle #ASML #bubble #China (Current event discussion 030) Data: Yahoo!Finance Credits: Photo by Possessed Photography on Unsplash

Which countries hold the largest gold reserves in the world?

What is the failure rate of startups? Is it 90%? Starting a new firm is a very challenging experience as the founders needs to overcome many obstacles before turning the new venture into a big success. So, it is no surprise to see many firms failing. However, how many firms do actually fail? The number you frequently come across is that 90% of startups fail. You find this number on different websites, in media publications of magazines as Forbes or Fortune. 90%? Really? What do data tell us? If we look at data from the US Bureau of Labor Statistics we learn that about 21% of new established firms fail after one year. This new goes up to 30% after two years, gradually increasing to 49% after five years. Not exactly 90%. After 10 years about 65% of new startups fails to exist. This number goes up to 80% after 20 years. Data from Europe suggests that 19.29% of European firms fail after one year and 55.04% after five years. #startups #survival #failure #entrepreneurship #founders (Fact 016: basic) Credits: Photo by Marcel Chavers on Unsplash Source: BLS (2024); Eurostat (2024)

What is the failure rate of startups in Europe? Does it matter in which country you start a new venture? What is the top and bottom three of survival rate among European countries? Why is the success so much bigger in Sweden or the Netherlands, and so much smaller in Portugal or Germany? Any ideas? #startups #survival #failure #entrepreneurship #founders (Fact 017: basic) Source: Eurostat (2024)

About half of the new startups fail after 5 years. What are the main reasons why starting a new venture is so risky? What the main reasons why new firms do not survive? #startups #survival #failure #entrepreneurship #founders (Fact 018: basic) Source: CBInsights (2021)

Have you seen the yield-to-maturities on European government bonds lately? Not surprisingly some countries pay a very low risk premium on top of German government bonds, for instance, the Netherlands or Ireland, while some countries pay a much higher risk premium, such as Italy. There are, however, more remarkable developments in this market. We can observe that France is currently paying a higher risk premium than Spain or Greece. Wow! We can also observe that financial markets access Portugal less risky than Belgium. Wow again! #government #bonds #YTM #risk #premium #default #eurozone #yield #yieldtomaturity #sovereign #sovereignrisk #France #Belgium #Greece #Portugal #Spain (Current event discussion 026)

A Messi IPO? The international football star Lionel Messi, one of the best players all time (he won 8 times the Best Player in the World award), listed his real estate investment (REIT) firm Edificio Rostower Socimi in Madrid. Shares started trading at 57.4 euros per share at the Portfolio Stock Exchange, a small European alternative market under Spanish supervision. The fund is valued at €223 million. His firm owns seven hotels, three office spaces and five apartments in Spain, mostly in the Spanish region of Catalonia. This is no surprise as he moved from Argentina at the age of 12 years to join FC Barcelona’s where he stayed until 2021. Would you invest in this REIT? #listing #stock #exchange #equity #Madrid #IPO #Messi #REIT #Portfolio (Current event discussion 029) Credits: Photo by Pedro Chosco on Unsplash

Is #BYD going to surpass $TSLA?

China’s EV leader BYD posts record sales in 2024 on.ft.com/40dsGLf

Time to sell $TSLA?

How many startups survive after 5 years?

Exercise of the day Billy, the Spanish family-owned shoe producer from Murcia, is considering a four-year €600,000 investment project, which will be entirely debt-financed at a market interest rate of 5%. The firm, subject to a tax rate of 35% on its corporate profits, expects to realize yearly operating cash flows of €950,000. The project is in line with the current risk-level of the firm. The CFO decides to use the APV-model to calculate the value of the project. The main benefit of the APV model is to clearly show the different value drivers of the project. The CFO is particularly interests in the value of the tax shield of interest payments of the loan. Your mission: Calculate the present value of the tax deductibility of the interest payments. #APV #project #interestrate #loan #unlisted #CFO #investment #calculation (Exercise 053; Advanced level) Credits: Photo by Matias Ilizarbe on Unsplash

Exercise of the day Poseidon, a Greek hotel booking firm, listed at the Athens Stock Exchange, has an estimated beta coefficient of 1.50. The company has 1 million outstanding shares with a nominal value of 16 euros each. The dividend for the current financial year is 1.20 euro and the CEO expects that the dividend will grow at a constant growth rate of 3% in the coming years. The company is financed with 8 million euros of debt issued at the current interest rate of 7%. The risk-free market interest rate is 4%, while the market risk premium is 6%. The company pays 40% taxes on its profits. How much is the firm’s cost of equity. #equity #CAPM #dividend #marketrisk #riskpremium #riskfree #capital #listed #calculation (Exercise 052; Basic level) Credits: Photo by Tania Mousinho on Unsplash

Exercise of the day A supermarket chain listed on Euronext Paris has a market value of equity of 200 million euro. Its cost of debt is equal to the risk-free rate of 8%. The market value of its debt is 100 million euro. The firms is in the 34% tax bracket. A financial analyst estimated its beta coefficient to be 1.50 and the expected market risk premium around 6.5%. What is the discount rate of a project assuming the firm is all‐equity financed and has the same business risk as the rest of the firm? Please submit your answers here. #equity #CAPM #costofcapital #marketrisk #riskpremium #riskfree #capital #listed #calculation (Exercise 051; Intermediate level) Credits: Photo by Hanson Lu on Unsplash

Exercise of the day An agrarian firm listed on Euronext Lisbon is recently trading around 12 euros. It has a debt-to-equity ratio of 0.85 (in market values) and is in the 34% tax bracket. A financial analyst estimated its beta coefficient to be 0.75 and the expected market risk premium around 6%. The firm’s cost of debt is around 6%, which is 200 basis points above the risk-free rate. What are the weights of debt and equity in the calculation of the WACC? #wacc #equity #CAPM #costofcapital #marketrisk #riskpremium #riskfree #capital #listed #calculation (Exercise 050; Intermediate level) Credits: Photo by Adele Payman on Unsplash