Ryan Perkins‚ Christopher Aldridge‚ Travis Johnson‚ Suzanne Holt Case Study: Boeing 777 Copyright 2010. Gatton Student Research Publication. Volume 2‚ Number 2.Gatton College of Business & Economics‚ University of Kentucky FIN 445 October 2010 Gatton Student Research Publication | 1 The purpose of this case study is to determine if Boeing should accept or reject the project of producing their new line of commercial aircraft‚ the Boeing 777. The aircraft will complete a family
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Q1. I started with picking up a relevant risk-free rate (Rfr) for the CAPM to calculate the cost of equity; I learned that 10 years T-Bond rate was more appropriate rate to be utilized for the sake of Rfr; the reasons cited in the reading “Best Practices in Estimating the Cost of Capital: Survey and Synthesis” made sense that the long-term bond yields more diligently replicates the default free HPR available on long term investments and hence more closely reflects the different investing decisions
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Grand Metropolitan PLC Company Background and Issues Grand Metropolitan PLC was a multinational holdings company that faced a hostile takeover threat in the late 1980’s and early 1990’s. The company specialized in wine and spirits. The headquarters for operation was in London‚ England at the time of this case. The major dilemma at hand is avoiding a takeover. The economy was bad at the time‚ and the company’s stock price was thought to be undervalued‚ as their low P/E ratio of 13.3
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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
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7E7 case study is to seek the answer for the project question. Why is Boeing contemplating the launch of the 7E7 project? Is this the good time to do so? How would we know if the 7E7 project will create value? How to estimate the WACC? Is there anything else the board of directors should consider in assessing the financial appeal of this project? Why might the board vote ’yes’ on the 7E7‚ when the cost of capital estimate is greater than the IRR? Why might the board vote ’no’
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Financial Decision Making Final Project Case analysis: Marriott Corporation Introduction and background The Marriott Corporation‚ an American firm‚ was founded in 1927 by J.Willard Marriot.The company began as a small beer stand and soon began to sell food and provided lodging that expanded rapidly. With the help of his wife Alice‚ the family owned business had 45 restaurants in nine states by 1940 and grew into one of the leading service companies. The Company has three major lines
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The Capital Assets Price Model (CAPM)‚ is a model for pricing an individual security or a portfolio. Its basic function is to describe the relationship between risk and expected return‚ which is often used to estimate a cost of equity (Wikipedia‚ 2009). It serves as a model for determining the discount rate which is used in calculating net present value. The CAPM says that the expected return of a security or a portfolio equals the rate on a risk-free security plus a risk premium. The formula is:
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noncarbonated drinks segment. Would Coca-Cola’s historically stellar performance in terms of value creation be threatened by the merger? The case asks to estimate EVA (economic value added) from 2001 to 2003‚ and provides income statement and balance sheet forecasts to aid in this task. We also need to determine each company’s weighted-average cost of capital (WACC) in order to estimate EVA. The primary objective of this case is to introduce the concepts and calculation of WACC and EVA.
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acreage in the United States had come to a halt due to recession. It is understandable that analyst prefer not to favor a loss-making firm in a degenerative industry. We calculated the EVA for each division of Valmont and here are the Assumptions: 1. WACC=10%‚ tax= 35%‚ 2. Net Asset for 1993‚ take average of previous year’s net asset over sales‚ 3. Add 1991 restructuring cost back to the profit. (Exhibits 1‚ 2‚ 5) The Industrial division consists of Construction Products and Valmont Electric. The EVA
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four different segments when calculating the WACC (Weighted Average Cost of Capital); Single Cost of Multiple Cost‚ Cost of Debt‚ Cost of Equity‚ and Weights of Capital. In Joanna’s estimate she chooses to use a single cost of capital. Her reasoning behind this decision lies in the risk associated with the different business segments of Nike. We agree with her assessment that a single cost of capital is most appropriate with Nike. It should also be noted that the major use of WACC is to assist in
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