a project that has the following cash flow and WACC data. What is the project’s NPV? Note that a project’s projected NPV can be negative‚ in which case it will be rejected. WACC: 10.00% Year: 0 1 2 3 Cash flows: -$1‚000 $450 $460 $470 Answer: 142.37 2. Choi Computer Systems is considering a project that has the following cash flow data. What is the project’s IRR? Note that a project’s projected IRR can be less than the WACC (and even negative)‚ in which case it will be rejected
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Executive Summary We found the weighted average cost of capital for Marriott as a whole to be 9.68%. The divisions of Lodging‚ Contract Services and Restaurants had WACCs of 8.14%‚ 13.33%‚ and 9.63% respectively. The only variable between these divisions that remains consistent is the tax rate. Marriott has a target rate for each of the divisions’ capital structures‚ which affects their debt and equity betas. Also‚ there are stark differences between the betas in the segments‚ as well as the
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1. How would you describe HPL and its position within the private label personal care industry? Hansson Private Label (HPL) is a manufacturer of products such as soap‚ shampoo‚ mouthwash‚ shaving cream‚ sunscreen and other personal care products. Its mission is to be a leading provider of high-quality private label personal care products to America’s leading retailers. The main topic of this paper is to evaluate a new investment of 50 million for a private label manufacturing proposal by a
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WACC before recapitalization Wrigley’s prerecapitalization WACC is 10.9%. The cost of equity assumes a risk-free rate of 5.65% for 20-year U.S. Treasuries (case Exhibit 7)‚ a risk premium is assumed 7% (or 5%)‚ and uses Wrigley’s current beta of 0.75 (case Exhibit 5). 4. WACC after recapitalization The increase in leverage will affect Wrigley’s WACC in at least three ways: 1. Cost of debt: Wrigley’s debt rating will change from AAA (consistent with no debt) to a BB/B rating reflecting
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14.35% Cost of debt = 0.10(1-0.35) = 0.065 WACC= 1*14.35%+0*0.065= 14.35%‚ (1+WACC= 15.35%) FCFF= EBIT (1-tax rate) +depreciation-capital expenditure- change in working capital Change in NFA = Ending NFA – Beginning NFA and Net earnings as EBIT (1-tax rate). Working capital = Current asset+1000- Current liabilities-cash Change in Working capital = Ending WC– Beginning WC Tax rate = 35% WACC= cost of equity Terminal Value= TV= FCFFn × (1+g)/ (WACC – g) Following table summarizes the impact
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Comparative study of risk and returns of BSE-200 stocks Kapil Malhotra 10FN051 Objective of the Analysis: The objective of my study is to understand the need to analyse the movement of the market and fulfilling them so as to achieve my goal of becoming better investor/ trader. Profit and loss are the two inseparable features of the stock market. But losses can be minimized and profits can be increased with the help of Technicals. I have done the analysis on the basis of the daily closing
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students the opportunity to explore how a company uses the Capital Asset Pricing Model (CAPM) to compute the cost of capital for each of its divisions. The use of Weighted Average Cost of Capital (WACC) formula and the mechanics of applying it are stressed. 8. • If students are familiar with the WACC formula‚ then the material can be covered in one class‚
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choice of WACC – Weighted Average Cost of Capital. WACC is one of the most widely used estimation of a firm’s cost of capital‚ with each and every source of capital proportionally weighted. A firm is generally financed by debt and equity‚ therefore‚ the equation to calculate WACC is as follows: Where: - book value of the firm’s debt - book value of the firm’s equity - value of the firm’s financing - cost of debt - cost of equity - Corporate tax In terms of investment decision‚ WACC reflects
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additional costs. • By mixing the permanent sources of funds used by the organization that will maximize their common stock price or searching for the funds mix that will minimize the organization’s composite cost of capital. • What is meant by WACC? What are some components
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1. Do you think Mercury is an appropriate target for AGI? Why or why not? Mercury is an appropriate target for AGI. AGI is looking to increase its revenue and profit by utilizing synergies. The initial aim of AGI for acquiring Mercury Athletics is to increase leverage with contract manufacturers and to boost the cooperation with the retailers and distributors. AGI was one of the most profitable and successful companies in the market segment‚ but the firm’s size remained rather small in comparison
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