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    Midland Case

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    2. Cost of debt‚ which is determined by adding the spread to Treasury (1.62%) to the rate of 30-year treasury bonds in 2007. Rd=0.0498+0.0162=0.066 3. Cost of equity‚ the EMRP (5%) and D/E (59.3%) was taken out of the context of the case. βa=Equity Beta/(1+D/E)= 1.25/(1+0.593)= 0.78 According to Table1‚ consolidated D/V is 42.2%‚ E/V is 57.8%‚ βe= βa*(1+D/E)= 0.78*(1+0.422/0.578)=1.35 Re=Rf+ βe *EMRP= 0.0498+(1.35*0.05)= 0.1173 4. WACC‚ the tax rate (38.58%) was from the 2006 taxes

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    Wacc Case

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    important that market-based value is used‚ and not the book value. Some companies trade their debt public‚ if so the market value of the debt can be determined by using the TRACE pricing database and it would be the ideal method to use. Since in most cases book value reasonably approximates the current market value it will be observed in the Abercrombie & Fitch Co. Annual report and used to determine the capital structure (Koller p. 263‚ 2010). To estimate the market value of the company‚ the number

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    Mci Case

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    1. What message is MCI trying to send to financial markets? From 1993 until the start of 1995‚ MCI’s stock had outperformed the S&P. However‚ in 1995‚ the stock’s performance was poorer than the S&P. With shareholder’s getting restless‚ the idea of a stock repurchase was being considered. Depending on which option MCI chooses—stock repurchase with debt issuance or open market repurchase program—the message being sent could be different. Let’s consider option one—MCI issues debt and uses the

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    case questions

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    What is Beta? How is it typically estimated? What is a drawback of this? How is the cost of debt estimated? Should you use book or market value weights? If you want market value of debt use (BV/100) * Price Should you use marginal or average tax rates? Why? How do the 2009 and 2010 WACCs compare? Why are they similar? 4. What is your best estimate of the WACC for Kraft‚ Campbell‚ and Del Monte? How do these WACC influence your thinking about the WACC for Heinz? American Greetings Case 1.The shares

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    Case Study

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    Case Study Difficult Transitions Tony Stark had just finished his first week at Reece Enterprises and decided to drive upstate to a small lakefront lodge for some fishing and relaxation. Tony had worked for the previous ten years for the O’Grady Company‚ but O’Grady had been through some hard times of late and had recently shut down several of its operating groups‚ including Tony’s‚ to cut costs. Fortunately‚ Tony’s experience and recommendations had made finding another position fairly easy

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    Case Study

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    CASE STUDY 1 MAKING FRIENDS AT PILLCO Samir Sethi‚ the Managing Director of Pillco‚ a Mumbai based textile manufacturer‚ was quite pleased with himself. It was Friday afternoon and his flight from Tokyo was just about to land at Mumbai. In conjuction with his Sales Director‚ Aman Kalra‚ he had just returned from Japan where he managed to successfully complete negotiations on a Rs. 25 million order from a Japanese folfing manufacturer‚ Kokuna. The order was for the manufacture of a new range of

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    Nike Case

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    What is the WACC and why is it important to estimate a firm’s cost of capital? Do you agree with Joanna Cohen’s WACC calculation? Why or why not? WACC is the weighted average cost of capital. It can be calculated as: WACC = (Weight of funding source 1) x (Cost of funding source 1) + … + (Weight of funding source n) x (Cost of funding source n) Usually this will be simply: WACC = (Percentage of debt) x (Cost of debt) + (Percentage of equity) x (Cost of equity) It is important to estimate

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    STATISTICS CASE

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    Ch11 case Golf 1. is mean driving distances of current balls is mean driving distances of new balls is mean driving distances of sampled current balls is mean driving distances of sampled new balls Use the test statistics and normal distribution table to get p-value. If p-value is smaller than‚ then we reject H0‚ which means the mean driving distances of current balls and new balls are different. 2. From the t distribution table we find that p-value is between 0.05 and 0

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    Boeing Case

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    Wdebt = proportion of debt in a market- value capital structure rd = pretax cost of debt capital tc = marginal effective corporate tax rate Wequity = proportion of equity in a market-value capital structure re = cost of equity capital We know from the case that: Tc = 35% Rf = 0.85% Wdebt = 44646/129686= 0.344% Wequity = 85040/129686= 0.656% From Exhibit 11‚ rd is calculated as below which is 5.335% |Debt amount |Price |Market value |YTM |Weighted YTM | |202 |106.175 |214.474 |3.911%

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    Nike Case

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    pay for every dollar it finances. Basically‚ the WACC is the minimum required return that the company must earn to satisfy its creditors‚ owners‚ and other providers of capital‚ or they will invest in another company that has higher returns. In this case‚ I will first address the issues with Cohen’s calculation‚ and then analyze an new WACC to decide whether we should invest in Nike Inc. Many issues should be addressed regarding Joanna Cohen’s WACC calculation. First‚ to calculate the debt cost of

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