COOPER CASE STUDY SUMMARY Nicholson Early in 1972 Nicholson dad to fend off a take over attempt by H.K. Porter Company Inc.‚ which controlled 30.5% of the company ’s stock. Porter made a cash tender offer to stockholders. However‚ Porter did not get enough stock to take over Nicholson. In trying to fight the takeover Nicholson made several merger overtures to other companies like VLN Corp. A few years back‚ it had rejected an offer from Cooper Industries. Cooper Industries & Nicholson Cooper
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Question 1) Why was McNeil’s new product proposal rejected? Should it have been? Explain. McNeils’ proposal was rejected because it did not meet the target return 15%‚ which was decided by Hubbard. However‚ the EVA is unfavorable under 15% return. Hubbard also states that a company like Enager should have a 12% return on EBIT. With this being said‚ McNeil’s proposal demonstrates a return of 13% (ROA = EBIT/Assets = $390‚000/$3‚000‚000)‚ and a favorable EVA will be provided under this return figure
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The Cost of Capital Project: Internet Version {December 2009} By Wm R McDaniel‚ PhD Objective The assignment is to estimate the weighted average cost of capital (WACC) for an actual corporation as of the current time. Actual managers would need to know their company’s WACC as a starting datum to estimate the discount rate to use in the net present value analysis of new projects or of termination decisions. The student will later need to know the technique for application in some case
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TANMAY GUPTA tg2311 American Chemical Corporation Cost of Capital : Collinsville Investment [pic] Where: Re = cost of equity Rd = cost of debt E = market value of the firm’s equity D = market value of the firm’s debt V = E + D Tc = corporate tax rate D/V and E/V Ratio: Since the target debt ratio of Dixon is given to be about 35%‚ we assume the target D/V ratio for Colinsville investment to be the same. Hence the E/V ratio
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WACC Example: A firm is considering a new project which would be similar in terms of risk to its existing projects. The firm needs a discount rate for evaluation purposes. The firm has enough cash on hand to provide the necessary equity financing for the project. Also‚ the firm: - has 1‚000‚000 common shares outstanding - current price $11.25 per share - next year’s dividend expected to be $1 per share - firm estimates dividends will
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Approach is to analyze financial maneuvers separately and then add their value to that of the business. | APV always works when WACC does‚ and sometimes when WACC doesn’t‚ because it requires fewer restrictive assumptions | Some limitations amount to technicalities‚ which are much more interesting to academics than to managers. | | Less Prone to serious errors than WACC. | Income from stocks- as opposed to bonds- may be taxed differently when the investor files a personal tax return : this usually
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What is the WACC and why is it important to estimate a firm’s cost of capital? Do you agree with Joanna Cohen’s WACC calculation? Why or why not? 1.1 The definition of WACC Weighted average cost of capital(WACC)‚ is a weighted-computational method of analyzing the cost of capital based on the whole capital structure of a firm. The result of WACC is the rate a firm use to monitor the application of the current assets because it represents the return the firm MUST get. For example this rate could
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Introduction Cooper industry‚ H.K. Porter Company and VLN Corporation are entangled in a battle over the takeover of Nicholson File Company. Both H.K. Porter Company and VLN Corporation have already made their offers to the Nicholson File Company shareholders and now the management of Cooper Industry have to decide whether to jump into the foray for the control of Nicholson File Company or not. The major issues faced by the management of Cooper Industry are as following: 1.Is Nicholson File Company
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= 10/80 = 0.125 Common: E/V = 50/80 = 0.625 = [0.250 6% (1 – 0.35)] + [0.125 8%] + [0.625 12.0%] = 9.475% 6. Executive Fruit should use the WACC of Geothermal‚ not its own WACC‚ when evaluating an investment in geothermal power production. The risk of the project determines the discount rate‚ and in this case‚ Geothermal’s WACC is more reflective of the risk of the project in question. The proper discount rate‚ therefore‚ is not 12.3%. It is more likely to be 11.4%. 7. The flotation
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an American global courier delivery services company headquartered in Memphis‚ Tennessee. FedEx Corporation is a Delaware corporation‚ incorporated October 2‚ 1997. FDX Corporation was founded in January 1998 with the acquisition of Caliber System Inc. by Federal Express‚ the world’s largest airline in terms of freight tons flown and the world’s fourth largest in terms of fleet size‚ delivering packages and freight to more than 375 destinations in nearly every country each day. With the purchase
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