MEMORANDUM DATE: TO: FROM: SUBJECT: Aquarius – Pub Valuation Overview The Greens are looking to sell Aquarius Ales‚ their pub located in Austin Texas as they are looking to fully retire and take up golfing and quilt making. Recently they have received their first offer to buy the business which was $450‚000 from Marc Johnston and John Sheridan‚ two University of Texas graduates who miss the college scene. The Greens are seriously considering the offer but feel that it
Premium Discounted cash flow Cash flow Weighted average cost of capital
market beta’s were used based on ? Rs = Rf + Beta x [ Rm – Rf ] Highest return noted was 7.29% ( = 3.69% + 0.72 * 5.3% ). Because of the market risks‚ different values of Market risk premiums and Beta was considered (using regression). Heinz’s WACC Calculation for a range with focus on Beta variation: We
Premium Weighted average cost of capital Financial markets Stock market
Equity beta 1.15 1.04 1.39 Rf 4.62% 4.62% 4.62% Rm 10.12% 10.12% 10.12% Rm - Rf 5.50% 5.50% 5.50% Cost of equity 10.95% 10.34% 12.27% Weight of debt 22.20% 27.10% 7.50% Weight of equity 77.80% 72.90% 92.50% WACC 9.30% 8.47% 11.72% Information on Corporation can be found from Exhibit 1 of Case 15 in Case Studies in Finance: Managing for Corporate Value Creation‚ 6th edition‚ by Bruner RF‚ Eades KM‚ Schill MJ McGraw Hill‚ pg 225. I am using 4.62% for
Premium Investment Finance Rate of return
recently highly used by investors coming from developed market economies. A basic construction of EVA measure is clear from the following formula: EVAt = NOPATt – Ct x WACCt where NOPATt is Net Operating Profit After Tax‚ Ct is long term capital‚ WACC is Weighted Average Cost of Capital. If EVA > 0 than we can say a company is successful. This is the only case wealth of shareholders increases because they gain more than what their original investment was. The service to creditors is included there
Premium Net present value Weighted average cost of capital Free cash flow
retain their customer base. Weighted Average Cost of Capital (WACC) for Apple The WACC calculation is a company’s cost of capital in which each category of capital is equally weighted. A firm should use WACC as the discount rate when calculating the Net Present Value (NPV) of any typical project. All capital sources such as common stock‚ preferred stock‚ bonds and all other long-term debt are included in this calculation. As the WACC of a firm increases‚ the beta and rate of return on equity increases
Premium Weighted average cost of capital Apple Inc.
Apex Financial Valuations By: Melvin Davis Applied Managerial Finance Phase 3 discussion board Dr. Bilal Makkawi April 24‚ 2013 Abstract After meeting with the CEO and the VP of the company I have been assigned the task to explain and define certain material for the company as the Vice President of finance. In order for everyone to have knowledge of what is about to take place in the upcoming weeks I will be defining and explaining some very vital information on Net Present Value (NPV)
Premium Net present value Cash flow Investment
Nike Inc. Case Number 2 Nike Incorporated’s cost of capital is a vital element when addressing opportunities regarding top-line growth and operating performance. Weighted Average Costs of Capital (WACC) is an essential estimation that is needed in order to determine the amount of interest that will be paid for each additional dollar financed. This translates to be the minimum overall required rate of return that the firm will keep. We disagree with Johanna Cohen’s assessment of Nike due to two
Premium
Heinz: Estimating the cost of capital in uncertain times 1. What is WACC? What is its purpose? 2. What were the yields on the two representative outstanding Heinz-debt issues as of the end of April 2010? What were they one year earlier? 3. What was the WACC for Heinz at the start of fiscal year 2010? What was the WACC one year earlier? Should you consider short-term debt? How reasonable are your interest rates for the firm? For the WACC? What is the market risk premium? What is Beta? How is it typically
Premium Stock Stock market Capital structure
Assessed Discussion Question 1. Define what we mean by the firm’s financing decision and the firm’s investment decision. What entities are on the “other side” of these decisions? Financing decision refers to those decisions related to the liabilities and the stockholders equality sides of the firm’s position statement especially concerning decision on to issue bond. Firms’ investment decision refers to those decisions concerned with the asset side of the firm’s balance sheet dealing with
Premium Finance Net present value Investment
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
Premium Net present value Cash flow Rate of return