Importance of the theories and implications on corporate financial decisions in Malaysia As business grows wider and complex across the border‚ there is a demand for better valuation tool to evaluate the performance of the business. It is important to adopt more innovative performance metrics so that the company’s management behaviors can be closely monitored to achieve the goal of maximizing the shareholders’ benefits. It is also important to access a firm’s value for any decision making regarding
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Group: Zhengtian “Darren” Ye‚ Bohan Li Course: FINA 3301 Professor name: Eliot H. Sherman Nike Cost of Capital Case Assignment 1. Calculate Nike’s Cost of Capital based on the book values presented in the case. 2. Calculate Nike’s Cost of Capital based on the Market Values presented in the case. 3. Evaluate Joanna’s calculation and identify and explain any differences between her calculation and yours. 4. Under what circumstances is using book values the most appropriate basis for calculating
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QUESTIONS 1. Explain the importance of risk adjustment in the capital budgeting allocation process by answering the following questions. a. Explain why risk adjustments are important and how they can affect firm value. Without the correct risk adjustment the firms stock will lose value by taking on high risk projects. The firm could also be considered uncompetitive if they reject low cost/low risk projects. b. Explain how the single hurdle rate currently used by Northern Forest Products can change
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the effects of issuing $2 billion of new debt and using the proceeds to repurchase shares of the following: a) the book value of MCI’s equity b) the price per share of MCI’s stock; and c) the earnings per share of MCI’s stock. 2) What is the current WACC for MCI and what would it become after the new debt and repurchase? 3) Would you recommend this new debt and repurchase of stock alternative to the MCI Board of Directors? Explain your answer. The first questions asks us what would be the effects
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interest rate of 2% per year and use the proceeds to repurchase shares. The firm operates in the Modigliani-Miller world with no taxes. a) What are Northrop’s firm value‚ cost of equity‚ and WACC before the recapitalization? b) What are Northrop’s firm value‚ equity value‚ debt value‚ cost of equity‚ and WACC after the recapitalization? Compare you results to those in a) and interpret the differences. c) What happens with Northrop’s equity values and share price at the time of the announcement
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requested that this cost of capital estimate and analysis be completed for the next board of directors meeting. Section 1 of this report discusses and analyzes the firms cost of capital. It begins with a discussion of the weighted average cost of capital (WACC)
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would you identify an organization’s optimal cost of capital? Is the cost of capital increasing or decreasing for most companies? What is meant by Weighted Average Cost of Capital (WACC)? What are the components of WACC? Why is WACC a more appropriate discount rate when doing capital budgeting? What is the impact on WACC when an organization needs to raise long term
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After calculating the FCF for all the projects‚ we got the IRR’s for each project. We got an IRR of 0% for project A‚ 32% for project B‚ 34% for project C‚ and 43% for project D. Similarly we got the NPV for each project using a WACC of 10% and 35%. Using the 10% WACC we got an NPV of -$1‚229‚980 for project A‚ and $3‚016‚880 for project B‚ and $5‚281‚910 for
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run? ●After borrowing $ 3 billion dollars what would the impact on the company’s debt rating be? ●What’s the impact on the company’s share value; would the recapitalization increase the company’s share value? ●What’s the impact on the company’s WACC‚ an increase or decrease? ●Would recapitalization increases the EPS of the company? Hypothesis “Whether the proposed leveraged recapitalization is efficient for Wrigley
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capital structure effects. Be sure to identify the ways in which capital structure can affect the weighted average cost of capital and free cash flows. The value of a firm’s operations is the present value of its expected future FCF discounted at its WACC. Some
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