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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= 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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Jack in the Box decreased in re-cent years. The ratio is below one and shows a conservative attitude in operation and may slow down the growth of the company. The Calculation of WACC Table 5 Equity Debt Pref. E Weight 75.58% 24.42% 0.00% Cost 10.96% 1.84% 0.00% W x C 8.28% 0.45% 0.00% WACC 8.73% WACC=Weight of Equity * Cost of Equity+ Weight of Debt * Cost of Debt + Weight of Pre-ferred Equity* Cost of Pref. E Table 6 Cost of Debt (After-tax) 1
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15-1 Human Factors in Aircraft Maintenance Colin G. Drury State University of New York at Buffalo Department of Industrial Engineering 342 Bell Hall Buffalo‚ NY 14260‚ USA 716-645-3624‚ fax 716-645-3302 drury@buffalo.edu Abstract: Human error is cited as a major causal factor in most aviation mishaps‚ including the 15% - 20% that involve maintenance error. Errors can be described as active failures that lead directly to the incident‚ and latent failures whose presence provokes the
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Summary: Clearwater Seafood (Clearwater) is a seafood company located on the east coast of Canada‚ and Clearwater Seafood income Fund with operations around the world. As a result of the increasing importance of the Canadian dollar relative to other currencies of the world‚ Clearwater recently stopped paying their distributions. The decision faced by the financial director to determine the strategy of the company should take to enable it to recover its distribution. This is due to the choice between
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Preface First of all‚ I would like to thank Ms. Thuy for her enthusiastic guidance and response all of questions to help me complete this exercise easily. Simultaneously‚ thanks to her professional lectures on class which also build me with deep understanding of how to access and deal with problems in financial management so that I can complete this report. All of the data is collected through 2 website: http://finance.yahoo.com/ and http://www.finra.org/ I. ABOUT FEDEX CORPORATION: FedEx
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ensuring that the food can be sold at rock bottom prices‚ while the outlets still manage to make a hefty profit. This report has indicated the problems that SEAFOOD TAKEAWY store currently facing by using secondary data searches and providing a marketing research process to improve on their quality of the products and service. 2. SEAFOOD TAKEAWAY Background
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