2 (Ex. 13.1 - 13.7 GT):) Exercises 13.1 - 13.7 make use of the following data: In 1985‚ General Motors (GM) was evaluating the acquisition of Hughes Aircraft Corporation. Recognizing that the appropriate WACC for discounting the projected cash flows for Hughes was different from General Motors’ WACC‚ GM assumed that Hughes was of approximately the same risk as Lockheed or Northrop‚ which had low-risk defense contracts and products that were similar to those of Hughes. Specifically‚ assume the Hamada
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1) We do not agree with Joanna Cohen’s WACC calculation because she mistakenly used historical data to estimate the future cost of debt. Joanna calculated the cost of debt by taking the interest expense for 2001 and dividing it by the average debt balance. The cost of debt for Nike is the effective rate that it pays on its current debt‚ meaning the yield to maturity of bonds should be used to make an estimate instead of the average debt balance. Through the use of past data‚ the average balance
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and NAB banks and to come up with a consolidated view of which bank is better from a investor point of view. Price-to-Earnings ratios (P/E)‚ Return on Equity (ROE)‚ Capital Adequacy Ratio‚ Dividend Yield ratio and Weighted Average Cost of Capital (WACC) were calculated in this report as indicators as they are deemed as the most relevant ratios in this context. The P/E ratio gives an indication of the number of
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interest-bearing bonds‚ or saved‚ versus spent. Weighted Average Cost of Capital (WACC) WACC is the calculation of a firm ’s cost of capital. All capital sources - common stock‚ preferred stock‚ bonds and any other long-term debt - are included in a WACC calculation (Investopedia.com). As the cost of capital is measured by looking at what amount is tied up in debt‚ equipment‚ and lost opportunity costs‚ the WACC percentage tells an important story. For example‚ if an organization has a capital
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Análisis Caso Marriott Corporation: Costo de Capital En el caso se plantea que Marriott utiliza cuatro elementos en su Estrategia Financiera las cuales apuntan a un crecimiento objetivo. Por lo que‚ se pregunta‚ ¿Son consistentes estos elementos con su crecimiento objetivo?‚ y para ello se realiza el siguiente análisis. I. Análisis de los Elementos de Estrategia Financiera: Primero debemos identificar que el alto crecimiento que busca Marriott es igual a maximizar el valor de la empresa y para
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corporate level and have an impact in calculating the Weighted Average Cost of Capital (WACC). 2. Calculate Midland’s corporate WACC. Be prepared to defend your specific assumptions about the various inputs to the calculations (risk-free rate‚ equity market risk premium (EMRP)‚ beta). Is Midland’s choice of EMRP appropriate? If not‚ what recommendations would you make and why? Calculating Midland’s Corporate WACC rd = Cost of debt re = Cost of equity D =
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Advance Managerial Finance Case 6: Deluxe Corporation 1. What are the risks associated with Deluxe’s business and strategy? Is Deluxe’s current debt level appropriate? Deluxe Corporation was once the largest printer of paper checks in the United States. However‚ around the past years it started to face difficulties primarily on its sale and earnings growth primarily because of alternative payments systems as online payments‚ credit and debit cards‚ etc. Some of the risk Deluxe Corporation
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CHAPTER 8 STOCKS AND THEIR VALUATION (Difficulty: E = Easy‚ M = Medium‚ and T = Tough) Multiple Choice: Conceptual Easy: Required return Answer: e Diff: E [i]. An increase in a firm’s expected growth rate would normally cause the firm’s required rate of return to a. Increase. b. Decrease. c. Fluctuate. d. Remain constant. e. Possibly increase‚ possibly decrease‚ or possibly remain unchanged. Required return Answer: d Diff: E [ii]
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Homework Chapter 10 1. Which of the following statements is CORRECT? a. The internal rate of return method (IRR) is generally regarded by academics as being the best single method for evaluating capital budgeting projects. b. The payback method is generally regarded by academics as being the best single method for evaluating capital budgeting projects. c. The discounted payback method is generally regarded by academics as being the best single method for evaluating capital budgeting projects
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"การเงินธุรกิจ" • WACC หรือ Weighted Average Cost of Capital ก็คือ ต้นทุนทางการเงินเฉลี่ยของกิจการต่าง ๆ ซึ่งประกอบไปด้วย ต้นทุนของเงินกู้ยืม (Cost of debt) และต้นทุนส่วนของผู้ถือหุ้น (Cost of equity) • หน้าที่หลักของผู้บริหารการเงินก็คือ ต้องพยายามบริหาร WACC ให้มีค่าต่ำ ที่สุด ซึ่งโดยทั่วไป ต้นทุนของเงินกู้ยืม จะมีค่าต่ำกว่าต้นทุนของส่วนของ ผู้ถือหุ้นค่อนข้างมาก ดังนั้น บริษัทใดก็ตามมีโครงสร้างทางการเงินที่สามารถกู้ยืมเงินได้ในระ ดับที่เหมาะสมกับฐานะการเงินย่อมจะทำให้ WACC มีค่าต่ำกว่าบริษัทที่ใช้
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