rf | g | βfor CC | βfor NC | rm-rf | CAPM for CC | CAPM for NC | Share outstanding | tax | 0.0680 | 0.0300 | 1.3300 | 1.2300 | 0.0750 | 16.78% | 16.03% | 90‚500‚000 | 0.35 | Total gain in Operating imcome (in million) | 1997 | 1998 | 1999 | 2000 | 2001 | Terminal value | CSX | 0 | 240 | 521 | 730 | 752 | 5620.90 | Norfolk Southern | 0 | 231 | 429 | 660 | 680 | 5375.29 | NPV(in million) | 1997 | 1998 | 1999 | 2000 | 2001 | Terminal | Total | CSX | 0 | 114.3997 | 212.6677 | 255.1742
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Entrepreneurial finance assignment 1 Problem 4.4. Introduction The CAPM model can be used to analyze the performance of a portfolio of investments. The model should be calculated by comparing the return of assets (Ri) minus the return of risk-free cash (Rf) of the fund against those numbers of a known index with historical data (Rm). With least-squares regression‚ a straight line has to be drawn through the points to finish the model. Alpha represents the point where the graph starts and
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managers like Kimi Ford to carefully assess the assumptions that are needed to calculate the cost of capital of Nike. Cost of Debt and Equity Cohen’s calculation for finding the cost of debt for Nike was “total interest expense divided by average debt balance”. I believe this isn’t a good enough calculation because the investors want to know the cost of debt on new debt‚ not on already outstanding debt. So to calculate a better cost of debt‚ I used the 20-year Nike Inc. debt with 6.75% coupon paid
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Nike Inc. – Cost of Capital & Stock Valuation Steven Seagal George Clooney Brad Pitt Background Nike Inc’s share price has declined considerably over the past few years and Kimi Ford‚ fund manager of NorthPoint Lager-Cap Fund‚ was considering investing in the stock. Nike was looking to revitalize itself by addressing both top-line growth and operating performance. The goal was to improve revenues that had plateaued‚ and increase profits that had decreased over the years. One
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convince Boeing’s CEO and other upper management that the project would be financially profitable for Boeing’s shareholders. In order to complete this financial analysis‚ Bair will need to calculate Boeing’s WACC along with IRR to determine whether this is a financially worthwhile project. In order to calculate the WACC‚ Bair must consider the betas from Boeing’s commercial sector as well as the defense sector. One beta cannot be used for the whole company due to the vast difference in volatility
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d1/(re-g) 3.29 = .22/[re- (-.017)] re = .22/3.29 +.017 = .04987 Calculate Esprit’s Pt using Giordano’s re of 5% PT= d1/(re-g) PT= 3.18/ (.05 - .12) = -45.43 Using the re of Giordano‚ Esprit should have a stock price of $-45.43 This value breaks the basic assumption that re should be greater than g therefore the assumption that Giordano shares a similar cost of capital to Esprit is invalid. Taking a CAPM approach to calculate re E(re) = rf + β (E(rm- rf)) β = .61 (as listed by reuters) rf
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TUI CAPM &Sources for Capital Module 3/ Case 09/25/2012 FIN301 Dr. Jensen CAMP & Sources for Capital This is a two part report based on the Principles of Finance regarding CAMP and Sources for Capital. Included in this report will be the following information: Part 1: There will be scenarios that will be explained in regards to diversifiable or un-diversifiable. Part 2: American Superconductor Part 1 “For each of the scenarios below‚ explain whether or not it represents
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Nations Bank Purpose: The purpose of this case is to calculate a stock’s price using its past dividends as an indicator of future dividend growth rates. The student must determine the stock’s required rate of return (CAPM) and future expected dividend growth rate and use the Gordon Growth Model to calculate a current price. 1. The equation for CAPM is kj = Rf + [bj x (Rm - Rf)] where‚ kj = required return on asset j‚ Rf = risk-free rate of return‚ bj = beta coefficient for asset
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average cost of capital for Marriott Corporation? • What risk-free rate and risk premium did you use to calculate the cost of equity? • How did you measure Marriott’s cost of debt? 1. Are the four components of Marriott ’s financial strategy consistent with its growth objective? 2. How does Marriott use its estimate of the cost of capital? Does this make sense? 3. Using the CAPM‚ estimate the weighted average cost of capital for a. Marriott Corporation b. The lodging division c. The
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Pricing Model (CAPM): Pros and Cons. CAPM defines the relationship between risk and return. The premise of the model is that the expected investment return varies in direct proportion to its risk‚ i.e.‚ the riskier the investment - the higher the return you should expect. Shows: • how much risk you are taking when investing in an instrument? • whether the instrument is rightly priced • whether you are getting sufficient return for the risk you are taking CAPM calculates the risk-adjusted
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