for various periods/staff members/departments) which are constantly changing. If the forma is the case‚ a simple ‘Flat File’ database is all that is required. There are several basic database products on the market that will fully service this requirement but all that is needed is a table in MS Word for Windows or a basic Spreadsheet application‚ such as MS Excel. If the later is the case‚ then a Relational Database is needed. Although there are many products on the market‚ they have several common
Premium Database Relational model Database normalization
determined that the project’s unlevered cash flows will be $2.6 million per year in perpetuity. Mr. Edison has devised two possibilities for raising the initial investment: Issuing 10-year bonds or issuing common stock. NEC’s pretax cost of debt is 7.2 percent‚ and its cost of equity is 11.4 percent. The company’s target debt-to-value ratio is 80 percent. The project has the same risk as NEC’s existing businesses‚ and it will support the same amount of debt. NEC is in the 34 percent tax bracket. Required:
Premium Weighted average cost of capital Finance Discounted cash flow
Methods of Corporate Valuation Prof. Ian H. Giddy‚ New York University | What is my company worth? What are the ratios used by analysts to determine whether a stock is undervalued or overvalued? How valid is the discounted present value approach? How can one value a company as a going concern‚ and how does this change in the context of a potential acquisition‚ or when the company faces financial stress? Finding a value for a company is no easy task -- but doing so is an essential component
Premium Stock market Cash flow Discounted cash flow
Chapter 16: Capital Structure: Basic Concepts 16.1 a. Since Alpha Corporation is an all-equity firm‚ its value is equal to the market value of its outstanding shares. Alpha has 5‚000 shares of common stock outstanding‚ worth $20 per share. Therefore‚ the value of Alpha Corporation is $100‚000 (= 5‚000 shares * $20 per share). b. Modigliani-Miller Proposition I states that in the absence of taxes‚ the value of a levered firm equals the value of an otherwise identical unlevered
Premium Stock Stock market Weighted average cost of capital
to net present value method. However‚ instead of using weighted average cost of capital as the discount rate‚ ungeared cost of equity is used to discount the cash flows from a project and there is an adjustment for the tax shield provided by related debt capital. Formula Adjusted Present Value = PV of Cash Flows using Ungeared Cost of Equity + Present Value of Tax Shield Where PV stands for ’present value’ and ungeared cost of equity is the required rate of return for a firm that is financed by
Premium Net present value Discounted cash flow
TANMAY GUPTA tg2311 American Chemical Corporation Cost of Capital : Collinsville Investment [pic] Where: Re = cost of equity Rd = cost of debt E = market value of the firm’s equity D = market value of the firm’s debt V = E + D Tc = corporate tax rate D/V and E/V Ratio: Since the target debt ratio of Dixon is given to be about 35%‚ we assume the target D/V ratio for Colinsville investment to be the same. Hence the E/V ratio
Premium Finance Debt Tax
Cost of Capital The required return necessary to make a capital budgeting project‚ such as building a new factory‚ worthwhile. Cost of capital includes the cost of debt and the cost of equity. AW´s Cost of Equity Capital RS = RF + β x (RM - RF) AW´s Cost of Capital of All Equity RS = R0 + B/S (1 – t c) (R0 – RB) Cost of Equity Capital for WWE´s Widget Venture RS = R0 + B/S (1 – t c) (R0 – RB) RWACC for WWE´s Widget Venture RWACC = B/S +B RB (1 – t c) + S/S +B RS APV Taking into
Premium Investment Depreciation Net present value
NEW ECONOMY TRANSPORT Principles of Corporate Finance 7th Edition Richard A. Brealey and Stewart C. Myers This is an equipment replacement decision. The objective is to minimize the present value of future costs. But there are a few real-life complications. • Some cash flows are stated in real terms‚ some in nominal terms. We will use a real discount rate for the real cash flows‚ a nominal rate for the nominal flows. The alternative is to convert all cash flows to real
Premium Net present value Inflation Depreciation
Part I – Perfect capital markets‚ capital structure and cost of capital (15 points) GP Corp. has common stock with a market value of $200 million and riskless debt with a value of $100 million. Investors expect a 15% return on the stock and a 6% return on the debt. Assume perfect capital markets without any taxes. a) Suppose GP issues $100 million of new stock to buy back the debt. What is the expected return of the stock after this transaction? (4 points) b) Suppose instead GP issues $50 million
Premium Weighted average cost of capital Generally Accepted Accounting Principles Corporate finance
Cost Concepts Semester II Basic Terms • Cost is the amount of expenditure‚ actual (incurred) or notional (attributable)‚ relating to a specific thing or activity. The specific thing or activity may be a product‚ job‚ service‚ process or any other activity • Expenses are expired costs‚ incurred and totally used up in generation of revenue • Loss is lost cost. The term ‘loss’ is used to describe mainly two accounting events. In traditional financial accounting it is used to denote a situation
Premium Costs Variable cost Cost