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What is Buffett's owner earnings formula and how does it differ from FCFE?
Owner earnings is Buffett's alternative cash profit measure...
How do value investors use free cash flow yield?
Free cash flow yield equals free cash flow per share divided by current share price...
What is the difference between an asset sale and a stock sale in M&A?
Asset sale: buyer gets step-up in basis but seller pays double tax. Stock sale: buyer inherits basis and all liabilities.
What makes an acquisition accretive or dilutive to EPS?
Accretive means pro forma EPS rises; dilutive means it falls. But accretion doesn't equal value creation.
How do you analyze the purchase price premium in an M&A deal?
Purchase price premium is (Offer Price - Unaffected Price) / Unaffected Price. Premiums are justified only if synergy PV exceeds the premium.
What is goals-based asset allocation and how does it use modules?
Goals-based allocation maps each client goal to a pre-built module (safety, lifestyle, aspirational, legacy) with its own risk profile and success probability.
What does 'free-float adjusted' mean for indices?
Free-float adjustment weights constituents by publicly tradable shares (excluding founder, government, cross-held blocks). Reduces tracking error for index funds and lowers weights for closely held firms.
How does an equal-weighted index work and why does it need frequent rebalancing?
Equal-weighted indices assign 1/N weight to each constituent. Price drift necessitates frequent rebalancing. Structurally tilts toward small-cap and value vs cap-weighted peers.
How does self-control bias affect retirement savings and what should advisors do?
Self-control bias produces chronic under-saving. Solutions commit the future self via auto-enrollment, auto-escalation, locked retirement vehicles, and mental-accounting buckets.
What was tax-exempt advance refunding and why was it eliminated?
Advance refunding pre-funded future calls with escrowed Treasuries. TCJA 2017 eliminated tax-exempt version; Willowcrest-style 5.25→3.4% refinance now requires taxable bonds.
What are key investment considerations for 529 education savings plans?
529 plans offer tax-free growth and withdrawals for qualified education expenses. Investment selection considerations include time horizon, state tax benefits, fees, and flexibility...
What is money duration and how does it differ from modified duration in practical risk management?
Money duration = modified duration × market value — gives absolute dollar risk per yield move, essential for hedging, VaR, and multi-position risk aggregation.
How do music royalty investments work in the streaming era?
Music royalties are contractual rights to receive payments whenever songs are performed, streamed, synchronized in media, or mechanically reproduced.
How do you measure impact on social bonds?
Social bonds measure impact via outputs (units, services) and outcomes (beneficiary change). Use ICMA, IRIS+, or SDG indicators; attribution is a challenge.
What are long-memory processes and fractional integration in return series?
A stationary process has long memory when its autocorrelations decay at a hyperbolic rate rho(k) ~ k^(2d-1) for 0 < d < 0.5...
How do I project lifetime healthcare costs in retirement?
Healthcare projection sums Part B, D, Medigap, OOP costs inflating 5% annually, yielding ~$165k per person lifetime...
What is a PAC II tranche in a CMO and how does it differ from the original PAC I?
PAC II is a secondary planned amortization class created from the support tranche, with a narrower prepayment band than PAC I. It offers moderate cash flow certainty — better than a support tranche but significantly less than PAC I — and is the second buffer to absorb prepayment variability.
What strategies can eliminate the sum-of-the-parts (SOTP) conglomerate discount?
Strategies to eliminate the SOTP conglomerate discount include spin-offs (most effective, with 10%+ outperformance), equity carve-outs, strategic asset sales, and operational simplification. The discount persists due to management incentives and information opacity.
How does a direct financing lease differ from a sales-type lease for the lessor?
A direct financing lease recognizes no selling profit at inception because the asset's fair value equals its cost to the lessor. All income is recognized as interest over the lease term. In contrast, a sales-type lease front-loads the manufacturer's profit at commencement. Total income over the lease life is the same under both classifications.
What criteria must be met for an operating segment to be reportable under IFRS 8?
Under IFRS 8, an operating segment is reportable if it meets any one of three 10% thresholds: segment revenue is 10% or more of combined revenue, segment profit or loss is 10% or more of the greater of combined profits or combined losses, or segment assets are 10% or more of combined assets. Additionally, reportable segments must cover at least 75% of external revenue.
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