Mercury Athletic Footwear: Valuing the Opportunity Active Gear‚ Inc. (AGI) is a privately held footwear company and is contemplating the possibility of acquiring Mercury Athletic Footwear. West Coast Fashions Inc.‚ a large designer and marketer of men’s and women’s branded apparel recently announced that it plans to shed its Mercury Athletic Footwear subsidiary. AGI’s head of business development‚ John Liedtke‚ believes acquiring Mercury Athletic Footwear is a good option for the company. Although
Premium Net present value Cash flow Discounted cash flow
(qualitatively) to value AirThread. Should Ms. Zhang use WACC‚ APV or some combination thereof? Explain. (2 points) * From the statement of AirThread case‚ we know that American Cable Communication want to raise capital by Leveraged Buyout (LBO) approach. This means ACC will finance money though equity and debt to buy AirThread and pay the debt by the cash flows or assets of AirThread. * In another word‚ it’s a highly levered transaction using a fixed WACC discount rate; however the leverage is changing
Premium Net present value Rate of return Investment
on Nike Inc. What is the WACC and why is it important to estimate a firm’s cost of capital? The WACC is a firm’s overall cost of capital‚ taking into account the weighted average of its equity and debt costs of capital. A firm’s WACC is the minimum return (hurdle rate) required by its capital providers to stay invested. Therefore managers of a firm should only invest in projects that generate returns exceeding the firm’s cost of capital. For the company’s owners the WACC is the minimum rate that
Premium Weighted average cost of capital Finance Investment
Chapter 9&10‚ financial policy 1) Duval Inc uses only equity capital‚ … answer: with a 11% return cuz wacc = 10% 2) 10.038: which one is correct? One defect of the IRR method that is assumes that the cash flows to be received from a project can be reinvested the IRR itself‚ and that assumption is often not valid. 3) Stern Associates is considering a project that has the following cash flows data. What’s the project’s payback? Year: from 0 to 5‚ cash flows: -1100$‚ 300$‚ 310$‚ 320$‚ 330$
Premium Net present value Generally Accepted Accounting Principles
the Vodafone Case We start of with making the calculations for the premium that Vodafone is going to pay for Mannesmann. We know that Mannesmann will own 47.2% of the equity of the newly combined company. This is 47.2% from € 275 375 million‚ which is €129 997 million. Vodafone is offering 53.7 shares of the value of December 17‚ so € 4‚957‚ for every share of Mannesmann. Mannesmann has 517‚9 million shares‚ so Vodafone would pay 517‚9 million * 53‚7 * € 4‚957 = € 137 860.3 million. This would
Premium Stock Stock market
AFIN832 Case study 1: Star River Electronics Ltd 1. Assess the current financial health and recent financial performance of the company. What strengths and/or weaknesses would you highlight to Adeline Koh? From the ratio of profitability‚ the company had about 18% on operating margin‚ 16% on ROE‚ 8% on ROS and 5% on ROA in both 1998 and 1999. However‚ there was a downturn trend in profitability ratio in 2000. This could be the result of price competition because of the introduction of DVD manufacturing
Premium Finance Debt Financial ratios
(1+KD/2)40 + 3.375(1-0.38)/(1+KD/2)n KD=4.52% C6: Using WACC formula: Rwacc =4.52*10.19% + 8.89*89.81% = 8.44% C7: average dividend growth rate: g = [0+12.5++ 20+12+8]/4 %=8% (Assumption: In this calculation‚ the growth rates significantly higher than 20% and negative figure have been ignored.) C8: Using CAPM: KE’=3.2%+0.91*5.5%=8.21% C9: Using DGM formula: P’=D1/ (KE’-g) =1.06*(1+8%)/(8.21%-8%)=$545 In Nike’s case‚ when Joanna Cohen calculated the WACC of Nike‚ she made several mistakes and led to a wrong
Premium Weighted average cost of capital Stock market Stock
investment of $10‚000‚000. The firm has a strong financial position with an overall WACC of 9.50%. Several potential options are examined including taking no action and approving the project under various financing structures. The option that maximizes shareholder value is approval of the project with100% of the financing to be provided via the issuance of new debt. This results in a NPV of $17‚818‚449 and WACC of 9.23%. Risks associated with the project are minimal and easily mitigated given
Premium Finance Net present value Corporate finance
long-term debt‚ and equity. A firm’s capital structure is the way the firm finances all of its operations‚ investments‚ and growth. When a firm’s debt-to-equity ratio maximizes its value and minimizes the firm’s weighted average cost of capital (WACC)‚ it is said to be at the “target” or “optimal capital structure”. Debt usually offers a lower cost of capital because of the ability to deduct tax from interest‚ but the company’s risk increases as debt increases. Part b. (Business Risk) Business
Premium Finance Weighted average cost of capital Corporate finance
MM 5007 FINANCIAL MANAGEMENT FONDERIA DI TORINO YP 52 A – Syndicate 2 Lupita Thanaya Putri – 29114322 Andika Fadhli – 29114358 Grace Alonia Sitepu – 29114403 Wildan Rachman – 29114416 Gwendy Dale Henry – 29114954 MASTER OF BUSINESS ADMINISTRATION SCHOOL OF BUSINESS AND MANAGEMENT INSTITUT TEKNOLOGI BANDUNG 2015 FONDERIA DI TORINO Case Background Fonderia di Torino specialized in tlie production of precision metal castings for use in automotive. aerospace. and constluction equipment. In
Premium Weighted average cost of capital