CHAPTER 11: THE COST OF CAPITAL LEARNING GOALS: 1. Understand the key assumptions‚ the basic concept and the specific sources of capital associated with the cost of capital. 2. Determine the cost of long-term debt and the cost of preferred stock. 3. Calculate the cost of common stock equity and convert it into the cost of retained earnings and the cost of new issues of common stock. 4. Calculate the weighted average cost of capital (WACC) and discuss alternative weighing schemes
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C A S E 3 Asian Journal of Case Research 4(S): 27 – 44 (2011) Flight of Funds MOHD NOOR ABU BAKARa‚ MARIATI NORHASHIMb* AND ABDUL HAMID MOHAMED GHOWSc ABSTRACT In 2006‚ Malaysian Travels Sdn Bhd‚ a subsidiary of a public listed company‚ purchased 40% equity in Turkistan Global Services Sdn Bhd on the basis of a project paper which outlined a potential travel business to exploit opportunities in Turkistan. Turkistan Global Services Sdn Bhd purported to have acquired the opportunity through a Memorandum
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EXERCISE THREE Case Study – Market Potential Question 1: The country‚ Federal Republic of Armorika‚ is participating in today’s interlinked global economy as they are importing and exporting‚ where the exporting ($US 469.4 billion) is at a larger volume then importing ($US 400.3 billion). This is an advantage to the international business market as Armorika’s exports are exceeding imports meaning that their net exports figure is positive. Armorika not only has a steady inflow of funds in
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Case Part 3 Report for the CFO There are several necessary journal entries that have been made to adjust the unadjusted trial balance. For Allowance for doubtful accounts: 1. In 2009‚ $ 58‚621.84 was directly written off to bad debt expense reflecting the amounts owed by customers who had gone bankrupt during the year. The journal entry would have been recorded as Dr Bad debt expense 58‚621.84 Cr Account receivable 58‚621
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Case Study 1: Kate needs to find a suitable care for her daughter Olivia. Kate’s day care centre does not operate extended hours. An alternative arrangement for Olivia would be to hire a Nanny. A Nanny can be employed by the family and can work on either a live-in or live-out basis to take care of Olivia. The advantages of hiring a Nanny are that the child will be getting a one-on one care and the care will be focused on her rather than a large amount of children. Another advantage of having a
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CASE 3 HARRAH´S ENTERTAINMENT: Hitting the CRM jackpot ANDREA HERNÁNDEZ PAULA BELTRÁN NICOLÁS LATORRE LORENA LEHMANN MARIA FERNANDA ROJAS Presentado a: LUIS FERNANDO CORREA MERCADEO GRUPO 2-1 ESCUELA INTERNACIONAL DE CIENCIAS ECONÓMICAS Y ADMINISTRATIVAS UNIVERSIDAD DE LA SABANA 15 DE AGOSTO DE 2014 BOGOTÁ D.C 2014-2 HARRAH´S ENTERTAINMENT: Hitting the CRM jackpot 1. BACKGROUND 2. UPDATING 3. PEOPLE
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CASE STUDIES IN FINACE CASE STUDY 3: ESTIMATING THE COST OF CAPITAL QUESTION 1: a)b)c) The Capital Assets Price Model (CAPM) is used to describe the relationship between risk and expected return and is often used to estimate a cost of equity (Investopedia‚ 2009). The cost of equity(COE) of the discount rate is: R = Rf + β*(E - Rf) (1) Rf = Risk free rate of return‚ usually U.S. treasury bonds β = Beta for a company E = Expected return of the market
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1. Suggest the issues that could have developed had the team not had a risk plan. The main factor for not completing the project is team failure which is because of poor overall initial planning. When there are unrealistic goals being set‚ creating a chaotic working environment there is bound to be nothing but pure failure of the project and its successin the near future. There can be two major causes for the team project failures; overdue or missed time standards‚ and going beyond set financial
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Dexter Roberts Prof. Wright MAN 314 Homework # Lois Quam Case 3 Case 3 Lois Quam 1. How does Lois Quam use emotions and moods in her speeches to covey her viewpoint? Cite examples to support your statements. What is emotion and mood? Emotions are a strong set of positive or negative feelings directed towards someone or something. Moods depict positive or negative feelings; moreover‚ a state of mind. In Lois’s quest for green economy it is quite clear that she is a buoyed‚ by a positive approach
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Cost of Capital Firms need to make capital investment i.e.‚ purchasing fixed assets such as factories‚ machineries‚ equipment‚ etc. After deciding what capital investments to make‚ they need to decide on the financing – sources of capital. The sources: Long-Term Debt‚ Common Stock‚ Preferred Stock and Retained Earnings. Then they need to find the cost of obtaining each source of financing today (not historical). Cost of Capital - The rate of return that a firm must earn on its investment
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