calculations used to determine the weighted average cost of capital (WACC). This SLP calculates the WACC for my SLP company – McDonalds‚ discusses how those calculations were arrived at and briefly describes WACC and what investors use it for. COMPANY NAME: McDonalds Inc Balance sheet date: 31 DEC 07 Market values date: 1 SEP 08 SOURCE BOOK VALUE MARKET VALUE PROPORTIONS COST (%) PRODUCT (a) (b) (c)
Premium Finance Weighted average cost of capital Generally Accepted Accounting Principles
Weighted Average Cost of Capital What It Measures The weighted average cost of capital (WACC) is the rate of return that the providers of a company’s capital require‚ weighted according to the proportion each element bears to the total pool of capital. Why It Is Important WACC is one of the most important figures in assessing a company’s financial health‚ both for internal use (in capital budgeting) and external use (valuing companies on investment markets). It gives companies an insight into
Premium Weighted average cost of capital Finance Investment
15% preferred stock‚ and 35% debt. If the cost of common equity for the firm is 19.6%‚ the cost of preferred stock is 12.9% and the before tax cost of debt is 9.5% what is the weighted average cost of capital? The firm’s tax rate is 35%. Answer: WACC = (50% x 19.6%) + (15% x 12.9%) + ( 35% x 9.5% x 65% = Q2: The following are the information of a company: |Type of capital |Book value (Tk) |Market value (Tk) |Specific cost (%) | | |
Premium Stock Weighted average cost of capital
WACC: Weighted average cost of capital =WACC= SS+B×Rs+BS+B×RB×1-tC note: Rs ‚ cost of equity; RB ‚ cost of debt; tC ‚ corporate tax rate. For cost of equity‚ Rs‚ we calculate it by using the SML‚ according to CAPM model. Rs=RF+β×[RM-RF] As we can see in the chart behind the case‚ beta of Worldwide Paper Company is 1.10; the Market risk premium (RM-RF) is 6.0%. Because this on-site longwood woodyard project has six year life and the investment spend over two years‚ the total long of this program
Premium Weighted average cost of capital Finance Debt
products are sold everywhere convenience stores‚ grocery stores and kiosks. 2 - Cost of Capital A company’s capital is consists of mostly debt or equity. Equity and debt are external sources of financing and financing from external sources is not without cost. The cost of capital is the cost to raise capital through equity and debt. It can be defined as the weighted sum of the cots of equity and the cost of debt. It determines the rate of return that a firm would receive if it invested its
Premium
WACC Weighted Average Cost of Capital Formula The WACC Weighted Average Cost of Capital formula is complex‚ and can be broken into several components. The individual component costs are provided in the following sections. WACC Weighted Average Cost of Capital Variables V=Firm Total Value (Debt + Preferred Shares + Common Equity + Retained Earnings) Md=Market Value of Debt Mp=Market Value of Preferred Shares Mc=Market Value of Common Equity Mr=Market Value of Retained Earnings K=Current
Premium Finance Weighted average cost of capital
Extra Credit Assignment: Yeats Valves and Controls Inc. Completed as a Group with the Following Individuals: (in alphabetical order by last name) Adetunji Adeniyi Tung F. Cheng Gregory Chiu Rashmin Patel WenHao Zhang Course Title: Accounting and Finance Course No./Section: MG6093 Instructor: Frank X. Apicella November 28‚ 2012 Yeats Valves Question The following are questions which should focus the groups on important
Premium Weighted average cost of capital Stock Stock market
Marriott optimize the use of debt in its capital structure helps the company maximize revenues from its debt’s management. The fourth financial strategy of repurchasing undervalued shares is also accordance with the growth objectives. Marriott calculates a “warranted equity value” and will repurchase its stocks if the price falls below the “warranted equity value”. By selling its undervalued common shares‚ Marriott is able to increase the profits. Also‚ the company uses the
Premium Weighted average cost of capital Interest Arithmetic mean
PROBLEM 4–14 Comprehensive Problem—Weighted-Average Method [LO2‚ LO3‚ LO4‚ LO5] Honeybutter‚ Inc.‚ manufactures a product that goes through two departments prior to completion—the Mixing Department followed by the Packaging Department. The following information is available about work in the first department‚ the Mixing Department‚ during June. Required: Assume that the company uses the weighted-average method. 1.Determine the equivalent units for June for the Mixing Department.
Premium
CHAPTER 9 THE COST OF CAPITAL (Difficulty: E = Easy‚ M = Medium‚ and T = Tough) Multiple Choice: Problems Easy: Cost of common stock Answer: d Diff: E [i]. Bouchard Company ’s stock sells for $20 per share‚ its last dividend (D0) was $1.00‚ and its growth rate is a constant 6 percent. What is its cost of common stock‚ rs? a. 5.0% b. 5.3% c. 11.0% d. 11.3% e. 11.6% Cost of common stock Answer: b Diff: E [ii]. Your company ’s stock
Premium Weighted average cost of capital Stock market Stock