Executive Summary Based on our analysis regarding competitive advantage‚ company comparison‚ financial data and operational excellence‚ we believe UPS will be a better performer in the long run as compared to FedEx. Competitive Advantage UPS has a first mover advantage over FedEx‚ beginning air delivery service in 1929. Although FedEx was the first to own and operate their own planes and introduced the innovative “hub and spoke” distribution pattern‚ UPS leads in specialized transportation and logistics
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1. How would you describe HPL and its position within the private label personal care industry? Hansson Private Label (HPL) is a manufacturer of products such as soap‚ shampoo‚ mouthwash‚ shaving cream‚ sunscreen and other personal care products. Its mission is to be a leading provider of high-quality private label personal care products to America’s leading retailers. The main topic of this paper is to evaluate a new investment of 50 million for a private label manufacturing proposal by a
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concepts: * Interest payments are tax deductible as an expense for the corp‚ debt financing creates valuable ITS for the firm. * Can include value of ITS in several ways: 1. WACC METHOD; discount unlevered free cash flows using the weighted average cost of capital (WACC). Because we calculate the WACC using the effective after-tax interest rate as the cost of debt‚ therefore this method incorporates the tax benefit of debt implicitly through the cost of capital. 2. ADJUSTED PRESENT
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WACC before recapitalization Wrigley’s prerecapitalization WACC is 10.9%. The cost of equity assumes a risk-free rate of 5.65% for 20-year U.S. Treasuries (case Exhibit 7)‚ a risk premium is assumed 7% (or 5%)‚ and uses Wrigley’s current beta of 0.75 (case Exhibit 5). 4. WACC after recapitalization The increase in leverage will affect Wrigley’s WACC in at least three ways: 1. Cost of debt: Wrigley’s debt rating will change from AAA (consistent with no debt) to a BB/B rating reflecting
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14.35% Cost of debt = 0.10(1-0.35) = 0.065 WACC= 1*14.35%+0*0.065= 14.35%‚ (1+WACC= 15.35%) FCFF= EBIT (1-tax rate) +depreciation-capital expenditure- change in working capital Change in NFA = Ending NFA – Beginning NFA and Net earnings as EBIT (1-tax rate). Working capital = Current asset+1000- Current liabilities-cash Change in Working capital = Ending WC– Beginning WC Tax rate = 35% WACC= cost of equity Terminal Value= TV= FCFFn × (1+g)/ (WACC – g) Following table summarizes the impact
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students the opportunity to explore how a company uses the Capital Asset Pricing Model (CAPM) to compute the cost of capital for each of its divisions. The use of Weighted Average Cost of Capital (WACC) formula and the mechanics of applying it are stressed. 8. • If students are familiar with the WACC formula‚ then the material can be covered in one class‚
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additional costs. • By mixing the permanent sources of funds used by the organization that will maximize their common stock price or searching for the funds mix that will minimize the organization’s composite cost of capital. • What is meant by WACC? What are some components
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The Cost of Capital Simrith Sidhu‚ Amy-Jane Miocevich‚ Jacques Rousset‚ Jing Tao Task One: Marriott uses the Weighted Average Cost of Capital (WACC) to measure the opportunity cost for investments. WACC is calculated using the 1987 financial data provided in the Marriot Corporation: The Cost of Capital (Abridged) case study and estimators. WACC = Cost of Equity x (Equity/Debt +Equity) + Cost of Debt x (Debt/(Debt + Equity)) x (1 – Tax Rate) This method is applied for Marriott as a whole and
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To: David Rogers From: JMSB Analysis Group Date: December 2009 Group members: Jun Gao Jiaqi Yin Qing Zhang Antoine Vulcain Main issues: Evaluation of two possible products: 1. NPV of two possible products 2. WACC analysis --CPAM --Bond yield plus Recommendation: Product B(aircraft) will be suggested due to the situation of the company. ---If there are enough funds for the company‚ product A is also acceptable
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investments would you value using Marriott’s WACC? Cost of debt：8.95%+1.3%=10.25% Cost of equity：8.95%+1.64*7.43%=21.14% 實際beta=1.11，根據exhibit 1，長期債務為24.99億美元，權益價值為35.64億美元(30元*118.8百萬股)，可以得出D/V=24.99/35.64=41%標的資本結構D/V=60%，所以必需做出調整。 V=D+E，D/V=41%，E/V=59% Beta of asset=(E/V)*beta of equity=0.59*1.11=0.655 Beta of equity=(V/E)*beta of asset=(1/0.4)*0.655=1.64 Risk free rate：美國30年期政府公債利率為8.95% Risk premium：exhibit 5 S&P500和美國長期政府公債的利率差為7.43% WACC：(1-0.34)*0.6*10.25%+0.4*21.14%=12.515% If
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