Question 1 Call options on XYZ Corporation’s common stock trade in the market. Which of the following statements is most correct‚ holding other things constant? Answer Correct Answer: The price of these call options is likely to rise if XYZ’s stock price rises. Question 2 Other things held constant‚ the value of an option depends on the stock’s price‚ the risk-free rate‚ and the Correct Answer: All of the above. Question 3 Which
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estimate a weighted-average cost of capital (WACC) for Boeing’s commercial-aircraft business segment in order to evaluate the IRRs. As a result of that analysis‚ the students identify the key value drivers and distinguish‚ on a qualitative basis‚ the key gambles that Boeing is making. The general objective of this case is to exercise students’ skills in estimating a weighted-average cost of capital and cost of equity. The need for students to estimate a segment WACC draws out their abilities to critique
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Jon Bennett Star River Case Analysis Page 1 of 7 FIN 461: Spring 2008/9 Initial Assessment: An initial look at the ratio analysis reveals that the annual sales-growth rate has been holding around 15%. This is perhaps the only good news from the analysis. A performance discontinuity makes its appearance in FY 2000 as a drop in operating margin. This was a result of a 21% increase in production costs and expenses and a 20% increase in admin and selling expenses. There was also an inexplicable 95%
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strengths and weaknesses of debt and equity financing? Discuss possible sources of debt financing. Propose a strategy for Pontrelli to obtain project financing. Compare and contrast EVA and MVA. Define WACC. How is WACC calculated? What are its strengths and weaknesses? Why is understanding WACC important? Calculate project viability‚ using the profitability index. Propose an alternate capital structure for Pontrelli. Develop an alternate project budget. What are the constraints? Create
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(EVA<0) means that is value destroying. Calculation EVA of PT. Krakatau Steel for 2014 start below. 1. Define the WACC Item Book Value % to MV Cost of Cap After tax CofC Cont. to WACC Short Term Debt 1‚092‚565.00 48.62% 9.22% 6.45% 3.139% Long Term Debt 262‚509.00 11.68% 9.35% 6.55% 0.765% Equity 891‚868.00 39.69% 10.78% 10.78% 4.277% 2‚246‚942.00 100.00% 29.35% Tax 30 % WACC 8.18 % 2. Define the WCR (Working Capital Requirement) Item 2013 2014 Working Capital Requirement +Inventory
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| - | 0.90 | 0.70 | β relevered (βl) | 1.37 | 1.09 | 1.27 | 1.29 | Cost of equity (Re) | 18.90% | 17.05% | 18.15% | 18.30% | Cost of debt (Rd) | 9.03% | 9.39% | 9.16% | 9.43% | Effective tax rate (t) | 43.68% | 43.68% | 43.68% | 43.68% | WACC | 8.68% | 12.35% | 12.69% | 10.51% | Overall‚ Contract Services division has the highest weighted average cost of capital and Lodging division has the lowest. Since different lines of business are different in nature‚ this estimation is reasonable
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3210AFE Advanced Corporate Finance Cost and Feasibility study for New Earth Mining‚ Inc. Student Name: Zekui Wang Student Number: S293105 Executive summary: Recently there has been wide speculation and interest placed on the iron ore project in the Kalahari in South Africa‚ and it is deemed as being a very attractive investment for New Earth Mining‚ Inc. (NEM). First of all‚ under normal condition‚ this project could contribute around $73 million to the shareholder. The return
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Nike‚ Inc.: Cost of Capital EXECUTIVE SUMMARY Kimi Ford‚ a portfolio manager of North Point Group a large mutual fund management firm‚ is looking into the viability of investing in the stocks of Nike for the fund that she manages. Ford should base her decision on data on the company which were disclosed in the 2001 fiscal reports. While Nike management addressed several issues that are causing the decrease in market sales and prices of stocks‚ management presented its plans to improve and
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the company should use Internal Rate of Return Calculation. 1. Looking at the cash flows doesn’t really say much. The assumption is that the firm is in the business to make profit. Profit is equal return on investment cost of borrowing. If the WACC is 10% or higher‚ firm should make more than 10% as return on investment. Looking at the cash flows only gives an idea of how much excess of cash flow over initial investment is made. Implementing the time value of money‚ larger cash stream in first
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acquisition‚ the expansion option‚ and in combination. Sterling must ultimately decide whether to pursue the acquisition either with or without the option‚ retract its offer‚ or renegotiate the terms. Discussion Weighted Average Cost of Capital (WACC) Calculation Cost of Equity (COE) Cost of Debt (COD) The
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