Weighted Average Cost of Capital Introduction and objectives This paper aims at describing a way to compute the Weighted Average Cost of Capital (WACC). This method is often used by company management to determine the economic feasibility of different projects and thus to compute the NPV of a specific project by discounting cash-flows. The WACC determines the return that the company should generate to satisfy its debt-holders. For the company‚ it consists in a tool for projects decision-making
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X. Weighted average cost of capital (WACC) The valuation of Abercrombie & Fitch Co. is based discounting future cash flows and economic profit‚ for that the weighted average cost of capital is needed. The WACC is the opportunity cost when investing in Abercrombie & Fitch Co. opposed to other investments with a similar risk. Investors want their return to excess the WACC before it can be considered a good investment; since people in general are risk averse‚ they want compensation for taking on risk
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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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The Hershey Company 1. History and Overview The first Hershey’s Chocolate Bar was produced in 1900‚ six years after the firm that would become The Hershey Company (“Hershey”) was founded by candy-manufacturer Milton S. Hershey. 2. Strategic Planning‚ Corporate Vision Until late last year when Hershey announced plans to revamp how it organizes its business with two new strategic business units—one for chocolate and the other for sugar confectionery—the company’s marketing organization
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Charlene Andrews Professor Wittke BUSS100-Business Principles Hershey’s Homework 1. Does Hershey use process manufacturing or the assembly process? Is the production of Hershey ’s chocolate an intermittent or continuous productions process? Justify your answers. Hershey uses both process manufacturing and the assembly process to produce and manufacture their products. Process manufacturing is used during the chocolate creation phase by combining various ingredients together‚ such as cocoa beans
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THE HERSHEY CHOCOLATE COMPANY INTRODUCTION The Hershey Company was originally a purely chocolate manufacturer but extended to wafers and other products‚ some even non-chocolate. Now‚ the Hershey Company has grown to become a leader when it comes to dark chocolate and premium chocolate. Hershey’s Mission Statement is “Bringing sweet moments of Hershey happiness to the world every day” (www.thehersheycompany.com). This means delivering quality confectionary to consumer for all occasion‚ being
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early 1894 by a persistent man named Milton Hershey (Hinkle). Milton Hershey was born in Derry Church‚ PA on September 13‚ 1857. As a child Hershey and his parents‚ Henry Hershey and Fannie Hershey‚ relocated many time. Hershey went to seven schools within eight years and by the fourth grade he was taken out to work with a printer as an apprentice. In 1872 Hershey left the printers shop to work in a confectioner’s shop near Lancaster‚ PA. Not long after Hershey discovered an interest in candy making
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Hershey CEO defends company strategy * February 4‚ 2010 * source: just-food Hershey president and CEO Dave West has stood by the US chocolate maker’s strategy and insisted the company can deliver “long-term value” for shareholders. The business‚ which generates the bulk of its revenues in the US‚ has faced questions over its future growth after deciding not to bid for UK confectioner Cadbury. Hershey has ventures in Brazil‚ India and China but industry watchers have argued the company’s international
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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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