Chinese steel mill contracts lasting for around 10 years. Baosteel was the first company to receive their iron ore. For the share valuation‚ the report uses the CAPM model to determine the prevailing cost of capital and also uses the dividend discount multistage model to predict the share price for the company. The components of the CAPM model (i.e. risk free rate‚ company beta‚ Market return and growth rate) are calculated and predicted on historical data. The valuation data is then compared with
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rather astonishingly close to the bid price of MidAmerican. (The DCF model can be found in appendix) Therefore with a value so similar to that of the bid price‚ it can be ascertained that the bid reflects the company’s value thus is a fair price. CAPM = | RF + | β | (rm-rt) | 0.1013 = | 0.0488+ | 0.75 | (0.07) | Table [ 1 ] Terminal Valuen = E(FCFE)n+1 /(rn -
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calculated by dividing Co-variance by variance of market. * Now‚ The CAPM model is applied to calculate Cost of capital of Equity i.e. Ke= Rm-(Rm-Rf) BETA. The risk-free rate is assumed to be 7.5%. * The capital structure of maruti Suzuki is drawn and subsequently the WACC is calculated taking cost of capital which has been calculated using CAPM model. * Now‚ we apply the dividend discounting model to calculate the present value of the share;
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actual income and balance sheet from FY1996 - 1999 and projected income and balance sheet with and without expansion from FY1999 - 2003. We also considered historical rate of return data for the analysis. We employed the Capital Asset Pricing Model (CAPM) with this data to find the value the firm to be $1.69million - $2.89 million. The Problem Carson "Buddy" Davis started Davis Boatworks in 1973 making a single 46’ boat for a customer in Manteo‚ North Carolina. Over the next twenty-six years
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funds. It depends on the risk of that investment (use of funds‚ not source of funds) 1. Cost of Debt (rd) – we use Bonds to represent the cost of long-term debt. Its required rate of return is the yield-to-maturity (YTM) of the bond. After we calculate the rd‚ we need to find the after-tax cost of debt : rd (after-tax) = rd(1 –T). In finding the YTM‚ we need to have the bond’s current price. If there is a flotation costs involved in issuing the bond‚ we need to deduct these costs first to find
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the cost of Debt: with a risk free rate‚ the floating and the fixed debt‚ its separates the divisions‚ uses A-rated debt for the spread‚ and debt / equity. all of which are acceptable. Marriott uses the Cost of Equity: with CAPM and a constant beta. The Capm is acceptable‚ but the constant beta isn’t the best option. there should be different betas for different division risks. 3) What is the Weighted Average Cost of Capital for Marriott Corporation? WACC= (1-t) x rD x D/V +
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(16%) Royalties Dividends Cameroon High risk - Environmental impact‚ Resistance from people/residents‚ Ground water contamination Returns - $535m Transit Required Returns CAPM model to calculate Return On Assets Given Asset B=0.6; ERP=6%; Risk free rate = 6%; debt/equity ratio = 60% CAPM r=r(tax free)* B*ERP Equity B = 0.6 * (1+0.6)=0.96 Required Retun On Equity = 6+0.96*6=11.76% Required Return On Asset = 6+0.6*6 =9.6% Q.4. Will the Revenue Management Plan work? Are there
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Marriot Corporation : the Cost of Capital. In front of Dan Chores is the issue of recommending three hurdle rates for each of Marriott Corporation’s three divisions‚ which have significant effect on the firm’s financial and operating strategies as well as its incentive compensation. Marriott Corporation had three major lines of business: lodging‚ contract services and restaurants. Also Marriott had its growth objective‚ to remain a premier growth company. The four components of
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and the investor holds an equally weighted portfolio of 10 assets‚ calculate the amount of unsystematic and systematic risk in her portfolio. 2. (Diversification over time). Suppose an investor invests $100 in a stock that in each period can either double or half with equal probability. The returns in each period are uncorrelated. (a) Calculate the variance of the investors’ dollar position after one period. (b) Calculate the variance of the investor’s dollar position after holding the stock
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book is mentioned as one of the references for this course. The two data sets chosen are 1. Stock_FX_Bond.csv 2. Stock_FX_Bond_2004_to_2006.csv The data includes the volumes and adjusted closing prices for GM‚ F‚ UTX‚ CAT‚ MRK‚ PFE‚ MSFT‚ IBM‚ C and XOM. The data also contains the volumes and adjusted closing prices for the S&P 500 index. The data set also includes treasury rates for different maturities and rates on corporate bonds as well as foreign exchange rates for the period of
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