recommended a strong buy while others expressed misgivings and recommended a hold. At this point‚ North Point Group decided to do their own analysis in order to decide if Nike shares should be purchased for the fund. The weighted average cost of capital (WACC) is the rate that a company is expected to pay its debt and equity holders to finance its assets. It is the minimum return that a company must earn on existing asset base to satisfy its owners‚ creditors‚ and other providers of capital or they will
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selected. Consequently‚ the company’s growth would be hurt as well. Hence‚ the calculation of costs of capital for use as hurdle rates is essential for managing the company’s growth. The cost of capital is computed using Weighted Average Cost of Capital (WACC) technique which is the weighted average of cost of equity and cost of debt of the firm or division. The cost of debt is the current borrowing rate at the time of the analysis (1988). The costs of floating rate debt and fixed rate debt are determined
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Average Cost of Capital (WACC) Calculations The weighted average cost of capital (WACC) is the discount rate used in the discounted cash flow analysis. Usually‚ the WACC is the weighted average of the cost of debt (Kd) and the cost of equity (Ke)‚ since debt and equity are the most common sources of funds for the companies. In general‚ the formula for WACC is the following: As implied by the formula itself‚ if a company does not have interest-bearing debts‚ then its WACC would equal to its cost
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Cost of Capital Firms need to make capital investment i.e.‚ purchasing fixed assets such as factories‚ machineries‚ equipment‚ etc. After deciding what capital investments to make‚ they need to decide on the financing – sources of capital. The sources: Long-Term Debt‚ Common Stock‚ Preferred Stock and Retained Earnings. Then they need to find the cost of obtaining each source of financing today (not historical). Cost of Capital - The rate of return that a firm must earn on its investment
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Table of Contents 1.0 Introduction In June 2002 Blanka Dobrynin‚ a managing director of Aurora Borealis hedge fund‚ considers the possible gains from increasing the debt capitalization of The Wm. Wrigley Jr. Company. Blanka suggests Wrigley raise the amount of $3 billion in debt of the capitalization while Wrigley has been conservatively financed and remained no debt at the end of 2001. This report is aiming to analyze whether Wrigley should use $3 billion debt recapitalization
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cash flow: 25 4.3 Weighted Average Cost of Capital (WACC) 25 4.3.1 Value of Debt and cost of debt: 25 4.3.2 Value of equity and cost of equity: 26 4.3.3 Weighted Average Cost of Capital (WACC): 27 4.4 Value of Harvey Norman Holding Ltd and estimated share price: 28 4.5 Sensitivity Analysis: 28 4.5.1 Operating revenue and share price: 29 4.5.2 Share price as a function of terminal FCF growth and WACC: 30 4.6 Share price assessment and investment decision:
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Symbolism in the Bible Symbolism is used all throughout the Bible. Everything in the Bible has a significant meaning and a purpose. Symbolism helps create understanding and depth. It can help make the theme of a story become clearer. Themes alone can sound preachy‚ and stories alone can sound shallow. Symbolism weaves the two together to create a perfect balance. Symbols are usually used to describe something complex‚ Jesus used symbols so we could understand his preaching’s. God’s journey with
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CASE STUDY HOMEWORK CORPORATE FINANCE PROFESSOR: G. BERTINETTI STUDENT Albert Maurer 1 The Situation: In 2010 a new company was created in order to enter into the food industry. They spent many months in studying the market‚ engineering the products and the commercial strategy‚ find out the production plants. At the end of 2010 the business plan is ready and the company has already participated to an exhibition where many potential customers said to be very interested to the project
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recommend Worldwide Paper Company to use the 9.62% discount rate‚ the returns will be great only if everything remains like expected So I would like to recommend them to evaluate themselves at least yearly as things may change from year to year. 3. The WACC of 9.7% yields an NPV for the project of $0.8 million and an IRR of 11.1% Case 19 1. Worldwide Paper Company has an opportunity to take on a new project. With this project they would be considering an addition of a new on site Longwood wood yard
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Week 2 Hill Country Snack Foods Case Summary: Hill Country Snack Food is a U.S. company involving business of manufacturing‚ marketing and distributing a variety of snacks. Having three components in its corporate culture‚ namely shareholder value-creation‚ cost efficiency and control and risk-avoidance‚ Hill Country’s growth was steady and debt was avoided. However‚ the company’s cash position and conservative capital structure has a negative impact on its financial performance measure‚ which
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