What is the "marginal cost of capital"? 5. Know how to calculate the cost of debt‚ before and after taxes‚ and then also including flotation costs. 6. Know how to calculate the cost of common stock using the Gordon growth model (the DCF method) and the CAPM‚ and how to adjust the Gordon model for flotation costs. 7. Know how to calculate the cost of preferred stock‚ with and without flotation costs. 8. Know how to calculate the market value weights for the WACC. 9. Explain how
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“Firm” will want to know the overall or average required rate of return on its aggregate investments. The Cost of capital allows us to set a benchmark that new projects need to meet in order to be viable. In the case of a “Project” it is a way to calculate the minimum required rate of return for an investment depending on its riskiness of its cash flow therefore it is a way to; a) Evaluate the Investment Decision b) Decide on a debt policy c) Appraise the performance of top managers
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HBR Case #1 Marriott Corporation: The Cost of Capital Group 16—Tutorial Mon 11:30am Group members LIU Ying‚ Chloe | 1155019350 | LUO Yingying‚ Irika | 1155020931 | TIAN Tian‚ Sarah | 1155019114 | WU Jiajie‚ Jesse | 1155019061 | 17 September 2012 Executive Summary By 1987‚ Marriott Corporation had grown into a large multi-dimensional company with over $5 billion assets in lodging‚ contract services and restaurants. The company enjoyed fast growth in both sales and assets at around
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returns‚ calculate the arithmetic average returns‚ the variances‚ and the standard deviations for X and Y. 4. You bought one of Great White Shark Repellant Co.’s 8 percent coupon bonds one year ago for $1‚030. These bonds make annual payments and mature six years from now. Suppose you decide to sell your bonds today‚ when the required return on the bonds is 7 percent. If the inflation rate was 4.2 percent over the past year‚ what was your total real return on investment? (Hint: calculate the current
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INTRODUCTION * Wrigley has a one sided capital structure * Their interest rates has been at their lowest in 50 years * However‚ they have the leading market share in a stale low technology business * Blanka Dobrynin‚ the managing partner of Aurora Borealis LLC (a company who used a hedge fund to invest in companies who are in distress‚ merger arbitrage‚ change-of-control transactions‚ and recapitalization) wanted to investigate a potential investment of $3B in Wrigley * Wrigley
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efficiency (weak‚ semi-strong‚ strong. - Characteristics of efficient markets. Lecture 2 CHAPTER 2: - Interest on Interest: Know how to compute it - Know how to calculate gross and simple holding period returns (HPRs) - Given a series of cash flows‚ know how to calculate the cash flow adjusted - rate of return Know how to calculate the
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Risk Premium 8 Yield Curve 9 Importance of Yield Curve 9 C- Computation of Return of Company and Sector by CAPM 10 D- Comparison of Actual Return with CAPM Results 10 Critical Analysis of Efficient Markets‚ Portfolio Theory and CAPM 11 Usefulness of Efficient Markets 11 Critical Review 11 Usefulness of Portfolio Theory 12 Critical Review 12 Usefulness of Capital Assets Pricing Model (CAPM) 13 Critical Review 13 Reference List 14 Appendices 15 INTRODUCTION: Experian PLC is a leading global information
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Telus: The Cost of Capital Telus needs to calculate the cost of capital from the variety of data given. The cost of capital is determined mostly by how the funds are used rather than where they were obtained from. It relies on the risk of investments Telus involves in‚ therefore‚ depending on cost of both equity of debt as described below. Also note that‚ even though the preferred shares are not attractive to issuers and may not get issued again‚ it is still on the company’s balance sheet and affect
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Grading Summary These are the automatically computed results of your exam. Grades for essay questions‚ and comments from your instructor‚ are in the "Details" section below. | Date Taken: | 5/25/2012 | Time Spent: | 2 h ‚ 45 secs | Points Received: | 161 / 210 (76.7%) | | Question Type: | # Of Questions: | # Correct: | Multiple Choice | 8 | 7 | Essay | 5 | N/A | | | Grade Details | 1. | Question : | (TCO D) Find the current dividend on a stock‚ given that the required
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DIRECTORS‚ NATURALLY FRESH PLC CONTENTS Page(s) 1. Introduction 3 2. Required Rate of Return on Equity 3 3. Beta 3 4. Capital Asset Pricing Model 4 5.1 Limitations of CAPM 4 5.2 The APT Model 4 5.3 The Three-Factor Model 4 5.4 Required Rate of Return using APT or Three-Factor 5 Model 5. Bonds 5 6.5 How bond prices are determined 5 6.6 The Rate of Return
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