on an estimate of Teletech’s WACC. Currently‚ the hurdle rate for Teletech is 10.407%‚ using data in Figure 1. The case rounds this number to 10.41% 2. What are the segment WACCs for Teletech? What assumptions do you have to make to do these calculations? Using the data in Figure 1‚ we can calculate the WACC for the Telecom Services division and the Products and Systems division of Teletech. Telecom Services WACC is 10.404% while Products and Services WACC is 10.417%. Assumptions need
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THE BOEING COMPANY: STRATEGIC AUDIT I. CURRENT SITUATION A. Current Performance Boeing performance has been outstanding for the past few years. Their Return on investment rose from three percent to 6 percent from 1998 to 1999‚ but it did drop to five percent in 2000. In 1996 Airbus claimed 42% of the market share‚ while Boeing had 64%. Boeing is looking at falling below the 50% mark. Boeing’s profits have been doing quite well. They have risen drastically in the past few years‚ which can be seen
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Problem statement: CHN Incorporated is evaluating the purchase of Hope Enterprises. The company could enhance its position in the mid-market gaming casino hotel business with the acquisition of Hope Enterprises. Hope Enterprises is considered a prime acquisition because of its strategic location‚ customer segment‚ booming market .The overall gaming casino business is predicted to boom in the coming year‚ with revenues increasing by 15%. However‚ CHN has to evaluate the synergies with Hope enterprises
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1) How much importance should be given to the energy cost situation? Michael Burton’s proposal to expand into new energy efficient products is justified by increasing interest in the public and private sectors to reduce energy costs. At the highest level of government‚ the Obama administration has tied the US economy’s energy policy with its future success and competitiveness with other global powers. In a speech on June 2009‚ President Obama specifically mentions the Energy Department’s plans to
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CASE FOR ANALYSIS 1 CASE FOR ANALYSIS – Case 1 Kinko’s New Operating Structure Kinko’s Inc. was the largest retailer of copying stores‚ but it had to change its operating structure in response to competitive pressures from Quick Copy and OfficeMax. Kinko’s had an informal management process and difficulty managing growth. The founder‚ Orfalea‚ used franchising to launch growth‚ but this approach did not assist Kinko’s in controlling costs or improving customer service. Consultants recommended
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References: Bruner‚ R.‚ Eades‚ K.‚ & Schill‚ M. (2010). Case Studies in Finance: Managing for Corporate Value Creation. (6th ed.‚ pp. 915-608). Boston: Mcgraw-Hill Irwin.
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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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years the company developed a reputation for being innovative in design and technology. In 1990‚ Airbus in conjunction with Boeing began a feasibility study to create a jumbo jet‚ but Boeing withdrew due to cost and uncertainty in demand. Airbus was interested in building the A3XX to have a product to compete in the very large aircraft (VLA) market. Boeing had been very successful in their production of the 747 after a very rocky start that threatened their survival. Airbus found
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BIDDING FOR HERTZ November 19‚ 2012 EXECUTIVE SUMMARY In April 2005‚ Ford announced its intention to investigate possible strategic alternatives for Hertz. At the same time‚ Ford’s stock price went down significantly. This negative reaction from the market shows Ford’s lack of confidence in its future operation‚ since Hertz is one of the strongest subsidiaries and revenue sources for Ford. Even though Ford would lose significant value of itself in this transaction‚ the slump in Ford’s
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both on top-line growth and operating performance. The company’s cost of capital is a critical element in such decisions and it is important to estimate precisely the weighted average cost of capital (WACC). In my analysis‚ I will examine why WACC is important in decision-making and I will show how WACC for Nike Inc. is calculated correctly. Also‚ I will calculate the company’s cost of equity using three different models: the Capital Asset Pricing Model (CAPM)‚ the Dividend Discount Model (DDM) and
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