cash flow: 25 4.3 Weighted Average Cost of Capital (WACC) 25 4.3.1 Value of Debt and cost of debt: 25 4.3.2 Value of equity and cost of equity: 26 4.3.3 Weighted Average Cost of Capital (WACC): 27 4.4 Value of Harvey Norman Holding Ltd and estimated share price: 28 4.5 Sensitivity Analysis: 28 4.5.1 Operating revenue and share price: 29 4.5.2 Share price as a function of terminal FCF growth and WACC: 30 4.6 Share price assessment and investment decision:
Premium Finance Weighted average cost of capital Stock market
CASE STUDY HOMEWORK CORPORATE FINANCE PROFESSOR: G. BERTINETTI STUDENT Albert Maurer 1 The Situation: In 2010 a new company was created in order to enter into the food industry. They spent many months in studying the market‚ engineering the products and the commercial strategy‚ find out the production plants. At the end of 2010 the business plan is ready and the company has already participated to an exhibition where many potential customers said to be very interested to the project
Premium Investment Stock market Risk
recommend Worldwide Paper Company to use the 9.62% discount rate‚ the returns will be great only if everything remains like expected So I would like to recommend them to evaluate themselves at least yearly as things may change from year to year. 3. The WACC of 9.7% yields an NPV for the project of $0.8 million and an IRR of 11.1% Case 19 1. Worldwide Paper Company has an opportunity to take on a new project. With this project they would be considering an addition of a new on site Longwood wood yard
Premium Net present value Rate of return
Week 2 Hill Country Snack Foods Case Summary: Hill Country Snack Food is a U.S. company involving business of manufacturing‚ marketing and distributing a variety of snacks. Having three components in its corporate culture‚ namely shareholder value-creation‚ cost efficiency and control and risk-avoidance‚ Hill Country’s growth was steady and debt was avoided. However‚ the company’s cash position and conservative capital structure has a negative impact on its financial performance measure‚ which
Premium Finance Corporate finance Capital structure
Market premium 0.086 0.086 0.086 Cost of equity 13.88% 15.4% 20.8% WACC 13.88% 13.5% 13.8% EBIT $2‚103 $2‚103 $2‚103 - Taxes - 34% $1‚388 $1‚388 $1‚388 EBIAT $1‚388 $1‚388 $1‚388 + Depreciation $500 $500 $500 - Cap exp. $(500) $(500) $(500) FCF 1‚388 1‚388 1‚388 Value of assets $10‚000 $10‚281 $10‚058 The following are calculations for: 0% debt: Cost of equity = Rf + Bu (Km - Krf) = 0.07 + 0.8(0.086) = 13.88% WACC = WD*Kd+ Ws*rs = 0 + 13.88 = 13.88% NOTE THAT: Km - Krf = Market
Premium Generally Accepted Accounting Principles Inventory
that Liedtke used base case assumptions to value Mercury‚ and also wanted to consider the value of possible synergies as well. FCFF Note: EBIT equals to the consolidated operating income‚ and the tax rate is 40%. Cost of equity‚ cost of debt‚ WACC and the leverage effect Assumptions: (1) Use 5-year U.S. Treasury obligation yield 4.69%‚ as the riskless rate for the period would correspond with the 5-year period of foreseeable cash flows. (2) For risk premium = expected market return
Premium Investment Weighted average cost of capital Financial ratios
Mid Exam Assigment Coke Versus Pepsi‚ 2001 Analysis Company Background The Coca-Cola Company : In 2000‚ Coca-Cola Company’s (KO) annual sales were $20‚5 Billion and its market value reached $110‚1 Billion. The company was the largest manufacturer‚ distributor and marketer of soft-drin concentrates and syrups in the world‚ and also marketed and distributed a variety of non carbonated-beverage product‚ which included minute maid orange juice‚ Fruitopia‚ Dasani bottled water‚ and Nestea‚ among
Premium Coca-Cola Pepsi
VI. WACC VII. Conclusion VIII. References I. Executive Summary Midland Energy Resources is a global energy company with operations in oil and gas exploration and production(E&P) providing a broad array of products and services to upstream oil and gas customers worldwide including refining and marketing (R&M)‚ natural gas‚ and petrochemicals. Janet Mortensen‚ the senior vice president of project finance for Midland Energy Resources must determine the weighted average cost of capital (WACC) for
Premium Weighted average cost of capital Corporate finance Free cash flow
Bendigo Bank Case Study 2011 Question (1): Capital Structure and Financing in the Banking Industry Introduction Australian banks are an interesting case of capital structure and financing considerations as far as companies go‚ in that they are regulated in a number of ways by the Australian Prudential Regulatory Authority (APRA) and the Reserve Bank of Australia (RBA). Considerations of capital structure have the effect of reducing the cost of capital and so in turn increase the value
Premium Corporate finance Finance Weighted average cost of capital
might miss profitable projects. Conversely‚ when the cost of capital is underestimated‚ more projects will have positive or large NPV and generate an IRR greater than the cost of capital‚ the company might accept projects leading to losses. 2. WACC = rd(D/V)(1-t)+re(E/V) According to Table 1: D/V=42.2%; Spread to treasury(Premium)=1.62% • According to Table 2: Because the majority of large firms and financial analysts report using long-term yields to determine the risk-free rate‚ so we
Premium Credit rating Weighted average cost of capital Finance