LECTURE 10 COST OF CAPITAL CLASS QUESTIONS 1. Roland Corporation’s last dividend (D0)‚ which was paid yesterday‚ was $2.50. The firm has a constant growth of 18.8%. The firm’s beta coefficient is 1.2. The required return on an average stock in the market is 13 percent‚ and the risk-free rate is 7 percent. Roland’s A-rated bonds are yielding 10 percent‚ its risk premium is 4% and its current stock price is $30. Which of the following values is the most reasonable estimate of Roland’s cost of retained
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08119105342 Course code and title MM5001‚ BUSINESS ETHICS AND LAW Course time and place JANUARY 2011‚ JAKARTA Lecturer SURNA DJ. TJ. Due date 10 FEBRUARY 2011 Program BLEMBA 11 Assignment number 1 Assignment title/topic/case SUMMARY OF WALL STREET MOVIE Assignment type (choose one) ( ( ) Midterm Exam ) Final Exam ( X ) Individual Assignment ( ( ) Group Assignment ) Other Further information (e.g. state if extension was granted and attach evidence of approval‚ revised submission date)
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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? WACC- The weighted average cost of capital is the rate (percentage) that a company has to pay to its creditors and shareholders to finance assets. It is the “cost” of their worth. Companies raise money from many different types of securities and loans and the various required returns are what make up the cost of capital. WACC is used to decide if an investment is worth
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Ameritrade’s managers should also consider what taking on these programs would do to its capital structure. They might have a certain debt to equity ratio they wish to maintain‚ or perhaps there would be covenants put on their contracts requiring them to maintain a certain debt to equity ratio while their loan was outstanding. Ameritrade should use a 6.10% risk free rate when calculating its cost of capital. This is the average of the 20 year bond annualized yield to maturity (on August 31‚ 1997)
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foster the belief that without a cache of disposable funds‚ a high level education‚ extensive training or a god-sent stretch of good luck that a successful venture in investing is just not plausible. However‚ fortunately‚ author Victor Chiu’s Wall Street Kitchen‚ dispels those preconceived notions by presenting proof positive that an average person did and continues to foster a successful run in stock market investing‚ namely his mother. Chiu’s mom‚ a lovable housewife works‚ from her kitchen table
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Telus: The Cost of Capital Telus needs to calculate the cost of capital from the variety of data given. The cost of capital is determined mostly by how the funds are used rather than where they were obtained from. It relies on the risk of investments Telus involves in‚ therefore‚ depending on cost of both equity of debt as described below. Also note that‚ even though the preferred shares are not attractive to issuers and may not get issued again‚ it is still on the company’s balance sheet and affect
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The Occupy Wall Street Movement that began in New York Sept. 17 and has since spread like wildfire across the world has made an undeniable impact on the social and political climate of the Upper Midwest. | With various Occupy protest committees continuing to spring up across Minnesota and North Dakota‚ many working people in the region who‚ previously‚ might not have come together on other political issues say they have found common ground in the Occupy Movement. Union‚ non-union‚ white collar
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Even though The Great Gatsby and The Wolf of Wall Street took place approximately sixty-five years apart‚ both books display similar themes such as greed‚ wealth‚ love‚ adultery‚ and corruption. Jay Gatsby and Jordan Belfort used illegal methods to build their fortunes; ones desire was greed‚ and the others was love. The Great Gatsby and the Wolf of Wall Street both utilize setting‚ conflict‚ and symbolism to prove that wealth and class don’t mean anything without love. One of the literary elements
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1) Executive Summary Marriott needs to calculate hurdle rates which will be used in its investment project selection. The company chooses to use cost of capital as its hurdle rate. Since the company has three business divisions and the cost of capital in each division varies and differs from that of Marriott as a whole‚ each division needs to have its own hurdle rate. The reason behind this practice is the company’s strategy which focuses on growth. Using a single hurdle rate for the whole company
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Movie Analysis: Wall Street Our beliefs‚ values‚ and culture influence how we behave ethically at home‚ with friends‚ and lastly in the business world. The movie Wall Street portrays tempting situations that result in crossing the line into an ethical world. Wall Street defines itself through a number of morality conflicts putting wealth and power against straightforwardness and sincerity. Bud fox is a young stockbroker looking for a way to succeed and make it big. He is prepared to do
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