’s common stock is selling for $8.59 per share‚ and its expected growth rate in earnings and dividends is 5 percent. What is Global ’s cost of common stock? a. 12.22% b. 17.22% c. 10.33% d. 9.66% e. 16.00% WACC with Flotation Costs Answer: a Diff: E [iv]. An analyst has collected the following information regarding Christopher Co.: • The company’s capital structure is 70 percent equity‚ 30 percent debt. • The yield to maturity on the
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of calculations for reference to different applications. Mortensen used WACC formula to estimate cost of capital‚ compute the cost of debt by adding a premium over US Treasury securities of a similar maturity‚ and calculate the cost of equity by using the CAPM formula. After reviewing the case and tables given‚ we calculated the company’s composite WACC and WACCs for each division respectively. The company’s composite WACC is 8.19%. The inputs we used are spread to treasury of 1.62%‚ debt ratio
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−investment + CFN CF1 CF2 + +L+ 2 (1 + WACC) (1 + WACC) (1 + WACC) N where‚ in a simple situation: equity debt WACC = equity + debt (cos t of equity ) + equity + debt (cos t of debt )(1 − tax rate ) Using debt for financing has a tax advantage in that interest payments are tax deductible. This tax deductibility is a source of value for the firm. In the normal NPV calculation‚ this additional value is accounted for in the WACC. However‚ in many cases the capital structure
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airline companies went into bankruptcy others merged to maintain their competitiveness. They started to entered alliances with one another. Airlines started to lease instead of buying aircraft. The industry’s growth continued in the 1990s. The low-cost carriers were gaining market share at the expense of network airlines also called hub-and spoke airlines. Even though the industry was already going through a rough patch after September 11‚ 2001 attack it had profound impact on all the airlines. The demand
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should undervalued at discount rates below 11.2% * The market responded mixed signals to Nike’s changes. Kimi Ford has done cash flow estimation‚ and asks her assistant‚ Joanna Cohen to estimate cost of capital. WACC Methodology: * The weighted average cost of capital (WACC) is the rate (expressed as a percentage‚ like interest) that accompany is expected to pay to debt holders (cost of debt) and shareholders (cost of equity) to finance its assets. * It is the minimum return that a
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to assess its two business segments. They look at return of capital on both segments and apply the same hurdle rate‚ which is also used for performance assessment. The hurdle rate was established using Teletech’s Weighted Average Cost of Capital (“WACC”) as a representation of the opportunity cost of money. Some of the company’s senior management‚ chiefly Rick Phillips‚ Executive Vice President of the Telecommunications Services segment‚ believe the company should be using different hurdle rates
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General Approach The company is split into 3 divisions Lodging‚ Contract Services and Restaurants. The WACC for each of the 3 divisions and then subsequently the entire corporation’s WACC need to be calculated. This will be done through calculating the WACC for each of the 3 divisions and then taking a weighted average of these 3 divisional WACC numbers to get the overall Marriott Corporation WACC. 1. Calculating the Beta a. Calculate the levered Beta for each division: BL = BU (1+D/E)
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Heritage Command”‚ Web). The United States Navy was formed during the revolutionary war. The first navy was the Rhode Island Navy in which created on June 12‚ 1775. Although that was the first U.S. navy‚ congress did not establish the official Continental Navy until October 13‚ 1775. During the revolutionary war‚ war ships were created in order to one of the following: interrupt the flow of British personnel and goods‚ defend ports‚ or fight the enemy ships (British) at sea. After this war congress
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repurchase its stock as the company believed that repurchases of shares were a better use of Marriott’s cash flow and debt capacity than acquisitions or owning real estate. Computing Marriott’s WACC The cost-of-capital was computed both divisionally and overall for the company. It required using the formula WACC = (1-t_)RD(D/V) + RE(E/V). _D and E are the market values of the debt and equity respectively and V (market value) = D+E. RD and RE are the pretax cost of debt and cost of equity respectively
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Political Risk: 2. If Venerus implements the suggested methodology‚ what would be the range of discount rates that AES would use around the world? If Venerus and AES implement the suggested methodology‚ the projects would change while WACC changes. To find WACC we must first calculate the leveraged bets for each the US Red Oak and Lal Plr Pakistan projects‚ using the equation unleveled beta/(1-D/V). It is easy to find debt to capital ratios‚ which are 39.5% for U.S and 35.1% for Pakistan‚ and the
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