WACC Example: A firm is considering a new project which would be similar in terms of risk to its existing projects. The firm needs a discount rate for evaluation purposes. The firm has enough cash on hand to provide the necessary equity financing for the project. Also‚ the firm: - has 1‚000‚000 common shares outstanding - current price $11.25 per share - next year’s dividend expected to be $1 per share - firm estimates dividends will
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What is the WACC and why is it important to estimate a firm’s cost of capital? Do you agree with Joanna Cohen’s WACC calculation? Why or why not? 1.1 The definition of WACC Weighted average cost of capital(WACC)‚ is a weighted-computational method of analyzing the cost of capital based on the whole capital structure of a firm. The result of WACC is the rate a firm use to monitor the application of the current assets because it represents the return the firm MUST get. For example this rate could
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The Cost of Capital 1. The yield to maturity for the bonds (since maturity is now 19 years) is the interest rate (r) that is the solution to the following equation: [$80 annuity factor(r‚ 19 years)] + [$1‚000/(1 + r)19] = $1‚050 Using a financial calculator‚ enter: n = 19‚ FV = 1000‚ PV = (-)1050‚ PMT = 90‚ and then compute i = 7.50% Therefore‚ the after-tax cost of debt is: 7.50% (1 – 0.35) = 4.88% 2. r = DIV/P0 = $4/$40 = 0.10 = 10% 3. = [0.3 7.50% (1 – 0.35)] + [0.2 10%]
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Geometry Segment 1 Notes . POLYGONS All of the figures you saw in the slideshow were polygons. A polygon is a closed figure with three or more sides. The prefix poly- means “many” while -gon means “angle.” So a polygon is a many-angled figure. 5 Sides : Pentagon 6 Sides : Hexagon 7 Sides : Heptagon 8 Sides : Octagon 9 Sides : Nonagon 10 Sides : Decagon 11 Sides : Hendecagon 12 Sides : Dodecagon A regular polygon is a many-sided figure where
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Case Study II : 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
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Approach is to analyze financial maneuvers separately and then add their value to that of the business. | APV always works when WACC does‚ and sometimes when WACC doesn’t‚ because it requires fewer restrictive assumptions | Some limitations amount to technicalities‚ which are much more interesting to academics than to managers. | | Less Prone to serious errors than WACC. | Income from stocks- as opposed to bonds- may be taxed differently when the investor files a personal tax return : this usually
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1. The communication process done by Agilent Technologies in terms of dealing with downsizing is remarkable for me. In my own opinion‚ they have done exemplary job in dealing with downsizing. They have created a good way of communicating to its employees. It tried to utilize every medium possible to disseminate information regarding the upcoming layoff of employees. Agilent Technologies used an open style of communication in their office to make the employees aware of what is bound to happen. The
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Parenting skills Segment 1: [Module 1 “The World of Parenting”] LAB QUESTIONS: What Makes a Good Parent? 1. What makes a good parent according to Dr. Tanya Byron? According to Dr. Tanya Byron a good parent is one who doesn’t worry much about being one. 2. What are some of the common problems that children might have? Common problems that children may have are the terrible twos‚ behavior problems‚ defiance and aggression. 3. Why is play important in the parent-child relationship? It’s really based
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Accounting Estimate • Accounting estimate – An approximation of a monetary amount in the absence of a precise means of measurement. This term is used for an amount measured at fair value where there is estimation uncertainty‚ as well as for other amounts that require estimation. PSA 540 9 The auditor shall review the outcome of accounting estimates included the prior period financial statements‚ or‚ where applicable‚ their subsequent re-estimation for the purpose of the current period. The nature
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4.05 Segment 1 Collaboration Assignment Directions: If you are unable to attend a live collaboration session‚ this activity will allow you to get credit for the Segment 1 Collaboration Project. Fill out the RED sections of this activity sheet. 1. Detalied explanation of how smoke detectors and carbon monoxide detectors work. How do smoke detectors work? * The battery applies a voltage to the plates‚ charging one plate positive and the other plate negative. Alpha particles constantly released
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