Cost of Equity: For the risk-free rate‚ we decided to use the 30-year old Treasury yield‚ which is currently 4.6%. We believe it is important to match the time horizon when comparing financial assets. Given that stocks have essentially an endless time horizon‚ the 30-year Treasury seems a more reasonable asset by which to compare stocks. 1-month Treasury Bills‚ for instance‚ are comparable to safety-deposit boxes‚ which are completely safe‚ but cannot ever yield a return. It’s highly likely that
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Average Cost of Capital What It Measures The weighted average cost of capital (WACC) is the rate of return that the providers of a company’s capital require‚ weighted according to the proportion each element bears to the total pool of capital. Why It Is Important WACC is one of the most important figures in assessing a company’s financial health‚ both for internal use (in capital budgeting) and external use (valuing companies on investment markets). It gives companies an insight into the cost of their
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NorthPoint Large-Cap Fund that she managed. A week prior‚ Nike Inc. held an analysts’ meeting to share their 2001 fiscal results and develop a strategy to revitalize the company. II. Background of Firm Nike’s revenues since 1997 had grown from $9 billion‚ while net income had fallen $220 million. A study written by Douglas Robson printed in Business Week revealed that Nike’s market share in the U.S. athletic shoe industry had fallen from 48 percent to 42 percent since 1997. In addition‚ supply-chain
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To : President‚ Marriott Corporation From : FLO299 Subject : Marriott Corporation – The Cost of Capital Date : April 6‚ 2010 The Importance of the Cost of Capital The cost of capital is important as it forms the basis for Marriott’s investing and financial decisions. By understanding and knowing the cost of capital‚ Marriott is able to select relevant investment projects for the company‚ determine incentive compensation‚ and repurchase undervalued shares when needed. The returns
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Company Introduction Established in 1978 by Bernie Marcus and Arthur Blank‚ the Home Depot Corporation opened its first store in Atlanta‚ becoming the world’s largest home improvement retailer. They are now the second largest retailer in the United States‚ offering 40‚000 to 50‚000 different types of home improvement supplies‚ building materials‚ and lawn and garden products. They carry a wide assortment of low-cost products‚ and offer expert advice and exceptional customer service. As an innovator
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MAC Development Corporation The McCaffreys are in a sticky situation as they have tied up land for a development project and everything seems to be falling apart. They have deadlines to meet and so many moving pieces that I had to read the Case Study several times to wrap my head around it all. At the start of the Phoenix project‚ there were basically three main puzzle pieces the McCaffreys had to juggle. The first one was the Village of Woodland‚ where the land was located‚ had verbally
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Nike‚ Inc.: Cost of Capital Case 15 Financial Administration FINC 5713-180 Team 1 Fall 2013. October 8‚ 2013. Introduction Kimi Ford a portfolio manager at NorthPoint Group which is a mutual-fund management firm‚ is considering to buy some shares from Nike‚ inc even if it’s share price had declined from the beginning of the year‚ for the Northpoint Large-cap fund she managed which invested mostly in Fortune 500 companies and it was doing well despite the decline
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------------------------------------------------- Chapter 9—Break-Even Point and Cost-Volume-Profit Analysis MULTIPLE CHOICE 1. CVP analysis requires costs to be categorized as a. | either fixed or variable. | b. | direct or indirect. | c. | product or period. | d. | standard or actual. | ANS: A PTS: 1 DIF: Easy OBJ: 9-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling 2. With respect to fixed costs‚ CVP analysis assumes total fixed costs a. | per unit
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these questions) Day 1 1. Identify the cost of capital and estimate the cost of placing an order. Assume that the annual inventory cost of a unit is given by‚ CH = iCI‚ where i is the cost of capital and CI‚ the unit cost of the item. 2. Consider the connector data and the all unit price structure described in Table 1. For each price level ($5.00‚ $4.75‚ etc.) determine the EOQ‚ and the corresponding total annual cost. Sketch the total annual cost as a function of the order quantity. Based on
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WEIGHTED AVERAGE COST OF CAPITAL 1. Calculate the current cost of capital of Secure and Safe on a weighted average basis Capital structure Type Details $50‚000‚000 bonds 5.5% coupon $20‚000‚000 preferred stock Par value $50 per share Dividend $2.75 per share p.a $25‚000‚000 book value of common stock Cost of capital is 12% Firm’s marginal tax rate is 30%. Cost of debt (issuance of bonds) According to the book Finance for Managers (2015)‚ we get the real cost of debt by taking out the tax liability
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