’s common stock is selling for $8.59 per share‚ and its expected growth rate in earnings and dividends is 5 percent. What is Global ’s cost of common stock? a. 12.22% b. 17.22% c. 10.33% d. 9.66% e. 16.00% WACC with Flotation Costs Answer: a Diff: E [iv]. An analyst has collected the following information regarding Christopher Co.: • The company’s capital structure is 70 percent equity‚ 30 percent debt. • The yield to maturity on the
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of calculations for reference to different applications. Mortensen used WACC formula to estimate cost of capital‚ compute the cost of debt by adding a premium over US Treasury securities of a similar maturity‚ and calculate the cost of equity by using the CAPM formula. After reviewing the case and tables given‚ we calculated the company’s composite WACC and WACCs for each division respectively. The company’s composite WACC is 8.19%. The inputs we used are spread to treasury of 1.62%‚ debt ratio
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−investment + CFN CF1 CF2 + +L+ 2 (1 + WACC) (1 + WACC) (1 + WACC) N where‚ in a simple situation: equity debt WACC = equity + debt (cos t of equity ) + equity + debt (cos t of debt )(1 − tax rate ) Using debt for financing has a tax advantage in that interest payments are tax deductible. This tax deductibility is a source of value for the firm. In the normal NPV calculation‚ this additional value is accounted for in the WACC. However‚ in many cases the capital structure
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[pic][pic][pic] [pic] Express Yourself A Project Report On Marketing & Corporate Sales SUBMITTED TO: SURYADATTA GROUP OF INSTITUTES (SIVAS)‚ DHANKAWADI PUNE SUBMITTED BY: UPENDRA KUMAR (PGCP‚ SCM+MARKETING ) SIKKIM MANIPAL UNIVERSITY) SUMMER BATCH YEAR: 2008-2010 A FINAL REPORT ON “LAUNCH OF AIRTEL POST PAID CONNECTION AND BROADBAND CONNECTION IN MARKET (MAHARASTRA
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General Approach The company is split into 3 divisions Lodging‚ Contract Services and Restaurants. The WACC for each of the 3 divisions and then subsequently the entire corporation’s WACC need to be calculated. This will be done through calculating the WACC for each of the 3 divisions and then taking a weighted average of these 3 divisional WACC numbers to get the overall Marriott Corporation WACC. 1. Calculating the Beta a. Calculate the levered Beta for each division: BL = BU (1+D/E)
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Polaroid Corporation‚ 1996 In late March 1996‚ Ralph Norwood was faced with the task of restructuring Polaroid’s capital structure. In the past‚ Polaroid had a monopoly in the instant-photography segment. However‚ with upcoming threats in the emerging digital photography industry and Polaroid experiencing recent losses in their market share due to Kodak’s competition‚ Gary T. DiCamillo‚ recently appointed CEO of Polaroid‚ headed a restructuring plan to stimulate the firm’s performance. The firm’s
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highest NPV and here in our case we will choose project S since it has a greater NPV compared to project S (19.98>18.79). If the projects are independent we will choose both. C - 3 The NPV will change if the WACC change; if the WACC increases the NPV will decrease on the other hand if the WACC decreases the NPV will increase. D – 1 Internal rate of return (IRR) is the discount rate that forces PV inflows equal to cost‚ and the NPV = 0. IRR using excel for project L: IRR 18.13% For project
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equipment also has an IRR above the 15% WACC and a positive NPV. However‚ the used equipment option would provide greater returns‚ than the new equipment will. 6. Stewart is concerned that the projected annual sales growth rate of 15% for incremental blended material may be optimistic. Recalculate the Cash Payback Period‚ Discounted Cash Payback Period‚ NPV‚ IRR and MIRR for each alternative assuming the annual sales growth rates of 10% and 5%. Assume a WACC of 15%. Does the change in growth rate
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Political Risk: 2. If Venerus implements the suggested methodology‚ what would be the range of discount rates that AES would use around the world? If Venerus and AES implement the suggested methodology‚ the projects would change while WACC changes. To find WACC we must first calculate the leveraged bets for each the US Red Oak and Lal Plr Pakistan projects‚ using the equation unleveled beta/(1-D/V). It is easy to find debt to capital ratios‚ which are 39.5% for U.S and 35.1% for Pakistan‚ and the
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value (NPV) analysis‚ or in assessing the value of an asset. WACC (weighted average cost of capital) is the proportional average of each category of capital inside a firm (common shares‚ preferred shares‚ bonds and any other long-term debt). WACC is also called required return. The term required return tends to reflect an investor’s point of view‚ while cost of capital is the same return only from the firm’s point of view. WACC is the rate of return required by the capital provider in exchange
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