scenario. There is a scenario in which the WACC changes independently off all other variables to about 22%. In this situation‚ the build option would provide an NPV of around $17‚000. That NPV while positive is nowhere near what Tremont would like out of their investment. The base IRR for the build option is low because it generates most of its value in the later years of the project. This makes it more sensitive to changes in the discount rate. The WACC can go as low as 25% below the base value
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Financial Engineering Case Study Written Report NIKE INC.‚ COST OF CAPITAL CASE REPORT Submitted to: Mr. Mieczyslaw Grudzinski Report date: 27 February 2014 BBA Finance & Accounting Semester 6‚ Academic year 2013-2014 Group Member: Tra My Nguyen 24458 Anna Kulishova 24444 Kaihao Zhang 25545 Zakariae Mokhliss 27727 NIKE INC.‚ COST OF CAPITAL CASE REPORT INTRODUCTION Our group was assigned to produce a report on the Nike Inc.: Cost
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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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CAPITAL MARKETS AND FINANCING SPR 13 | Group Assignment 1 | UST Case Study | 2/19/2013 | | | | Question 1: In order to calculate the impact of the leverage recapitalization on UST’s value‚ we used the WACC and APV methods to calculate its value before and after the recapitalization. WACC Method Using the WACC method‚ we first derived UST’s return on assets (rA). Since we are given the firm’s market capitalization‚ debt and cash‚ we calculated the current Enterprive Value
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CASE 14 NIKE‚ INC.: COST OF CAPITAL Cost of capital denotes the opportunity cost of using capital for a particular investment as oppose to the alternative investment which has similar systematic risk. It is extremely important since it is used in evaluating whether a project is feasible or not in the net present value (NPV) analysis‚ or in assessing the value of an asset. WACC (weighted average cost of capital) is the proportional average of each category of capital inside a firm (common
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Vessels • Motor vehicles• Consumers price-performance evaluation and the industry wide price elasticity have led to a more complex travel industry 8. Power of Suppliers• Two main suppliers (92%): Boeing and Airbus• Little rivalry and a lack of industry intensification• Vertical integration with Boeing or Airbus 9. Power of Buyers• Overall bargaining power of buyers is weak to moderate • Switching ones ticket from one airline to another is fairly high • Airlines set ticket prices without allowing
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strategic benefit would have to be captured in the cash flows. Future cash flows are the statistical mean of random variables rather than the median or mode. The project is discrete and does not therefore have a terminal value whereas that would not be the case in valuing a going concern. Additionally‚ capital budgeting project in competitive markets cannot sustain positive economic rents indefinitely. (Your latest and greatest bank product will be imitated by your competitors in an
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have followed suit‚ and literally hundreds of millions have been raised as a result. So‚ as far as air travel is concerned‚ we have transformed it‚ and also‚ to be honest‚ I think that we ’ve done the same to train travel. * * 1. VIRGIN CASE STUDY THE TEAM MILENA BANASZEK MONTY KHAN CHRISTOPHER PEAT LINDA RICHARDS FIRAT UCER * 2. QUESTION THREE “What criteria should Branson apply in deciding what new diversification to pursue?” * 3. CONTENTS Overview of Virgin Virgin’s
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Koito-Pickens-Toyota Case Question 1 The Japanese corporate governance system differs vastly from the US system. Discuss corporate governance issues that may arise under the Japanese keiretsu. The corporate governance system in Japan is widely different from the US one insofar as it mostly involves a unique business model called “Keiretsu”. A Keiretsu is a form of corporate structure that groups a set of companies with interlocking board of directors and common business interests. Thus‚ due
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Case note on Nike Cost of Capital Group 2 Members : Devendra Rane‚ Vivekkumar Nema‚ Chandrashekhar Joshi‚ G. Ajithkumar‚ Prakash Shetty Case Background: * NorthPoint Large Cap Fund weighing whether to buy Nike’s stock. * Nike has experienced sales growth decline‚ declines in profits and market share. * Nike has revealed that it would increase exposure in mid-price footwear and apparel lines. It also commits to cut down expenses. * Kimi Ford’s initial assessment at a discount rate
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