chlorate companies. The average unleveraged beta obtained from the two companies is 1.035 which reflects the risk of the project. Adjusting Dixon’s beta by re-levering it using its own target capital structure of 35% ends with a beta of 1.59. The beta obtained is used to derive the CAPM method‚ resulting in a 21.45% cost of equity. We assumed that the debt borrowed by Dixon has a rate of 11.25% calculating an after-tax cost of debts of 5.85%. Therefore‚ the weighted average cost of capital (WACC) for
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Novo Mercado for Embraer The migration of businesses to Bovespa’s Novo Mercado listing aims to make companies’ shares more attractive to investors due to higher standards of corporate governance‚ and consequently greater transparency and a higher degree of protection of minority shareholders. Among the main features of the Novo Mercado are: commitment to achieve in three years a minimum portion of 25% of shares in free float‚ and the conditions provided to majority shareholders in the disposal
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its Dividend Policy 16 5.4 Analysis of Company’s Dividend Policy and Lintner’s Analysis 16 5.5 Optimal Dividend Policy 17 6 Valuation 19 6.1 Assumptions 19 6.2 Valuation Method 20 6.2.1 Determining the Cost of Equity (rS) 20 6.2.2 Determining the Cost of Debt (rb) 22 6.2.3 Weighted Average Cost of Capital (WACC) 22 6.2.4 Estimating the Future Sales Growth Rate 23 6.2.5 Estimating Future Cash Flows 23 6.2.6 Estimating Firm value 24 6.3 Sensitivity Analysis 25
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its Dividend Policy 16 5.4 Analysis of Company’s Dividend Policy and Lintner’s Analysis 16 5.5 Optimal Dividend Policy 17 6 Valuation 19 6.1 Assumptions 19 6.2 Valuation Method 20 6.2.1 Determining the Cost of Equity (rS) 20 6.2.2 Determining the Cost of Debt (rb) 22 6.2.3 Weighted Average Cost of Capital (WACC) 22 6.2.4 Estimating the Future Sales Growth Rate 23 6.2.5 Estimating Future Cash Flows 23 6.2.6 Estimating Firm value 24 6.3 Sensitivity Analysis 25 6
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future free cash flows for the company‚ and brought it back to NPV using the company’s weighted average cost of capital (WACC). The WACC calculated uses information provided in the case‚ and some market information. We came to 14.84% company’s WACC (Exhibit XX). As sensitive case‚ we weight the three scenarios with different weight. Seagate performs better than average even with their low profit margin average. For this reason‚ we averaged the NPV of the down case at 20%‚ the base case at 50%‚ and the
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management concluded the large fixed cost absorbed sale figure. First it is important to understand the standard costing system implemented in Rubber group. Standard costing assigns quantity and price standards to each component of variable and fixed costs in calculating the total cost. In the case of NASA‚ the system uses standard purchasing price (input cost) and standard inputs usage in place for variable costs‚ and standard spending price (input cost) and standard
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the additional value created by combining both firms bearing in mind the companies’ financial situations. All this considered‚ Nokia’s average share price during the last year is considered to have a 0.14% upside potential and synergies are estimated around 13% of Nokia’s average market capitalization. As a result‚ an offer at 19.4% premium over Nokia’s average market capitalization will be suggested with 100% in cash. 2 Acnowledgments The author would like to thank: Professor Peter
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based upon the underlying economics? Underlying economics: -(Demand of shrimp uncertain) As we know U.S. economy was on recession on this years‚ In 1975 the tax rate was the highest since 1947; the unemployment rate was extremely high (6%). The average of the Treasury Bills from 1970-1980 was 7.08%. Despite the economic conditions‚ analyzing the Income statement and Balance sheet with an inflation of 11%; I think that the purchase of a new plant is a good long term investment which will start
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financial forecast provided in Exhibit 13 and discount it to find the current enterprise value‚ then dividing this computed value by the estimated number of shares outstanding. A very important metric that should carefully be analyzed is JetBlue’s cost of
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by her promotion and the reliance on her calculations. However‚ her cost of equity numbers were used as a starting point and manipulated rather than used as presented. Examining the calculation of the firms weighted average cost of capital and betas as well as comparing with others in the same type of industries indicates that assumptions should be changed for the project being analyzed. Consideration of debt‚ equity‚ and costs must be given for the specific project while being mindful of company
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