may seem odd‚ but the problem this company has is that it has no debt. Interest rates are at their lowest point in 50 years‚ but debt financing is at a decline. Many companies are missing opportunities to add value to their company‚ and in extreme cases such as The William Wrigley Company‚ mature firms may use no debt at all. Alternative Solutions: Borrow $3 Billion at a credit rating between BB and B‚ to yield 13%‚ with the intention to pay an equivalent dividend or to repurchase an equivalent
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most. I had to calculate the WACC of the firm for the various credit ratings. In order to accurately calculate this‚ I had to incorporate the repurchase of shares and add the newfound debt to the total debt from 2001. The project debt used by the corporation didn’t factor in the repurchase of shares and therefore it was calculated wrong. To help me solve the equation for the best WACC‚ I had to make some basic assumptions about the case. For starters‚ as shown in case‚ I decided to use a 37% tax
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FBE 421 Marriott Corporation ------------------------------------------------- Introduction Founded in 1927‚ Marriott Corporation has become one of the leading food service companies in the United States. As of 1987‚ Marriott recorded a profit of $233 million on sales of $6.5 billion and retained a high sales growth rate of 24%. Marriott runs on three major lines of business lodging‚ contract services‚ and restaurants. Lodging division which includes 361 hotels generated 41% of 1987 sales
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importance of flight frequency. Calculation of Market Debt to Equity‚ Debt to Value‚ Equity to Value Ratios * Assumption: market and book value of debt are the same Market value of equity in EADS: (18.35)*(807‚157‚667) = 14.8 billion -Case states 16 billion; roughly the same but we will use 16 Book Value Debt EAD: 5.6 billion Debt/Value: .26 1.0 Euro = .6209 pounds sterling Market value of equity in BAE: (382p/100p/pound)*(1‚876‚000‚000) = 7.2 billion pounds 7.2 billion pounds
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The Boeing Company is an international aerospace and defense corporation originally founded by William E. Boeing in Seattle‚ Washington. The international corporate headquarters are now located in Chicago‚ Illinois (Boeing‚ 2009). Boeing was initially incorporated as Pacific Aero Products Company in 1916 (Boeing‚ 2009). Since 1916‚ Pacific Aero Products Company has transformed into Boeing and expanded into the largest global aircraft manufacturer by revenue‚ orders and deliveries‚ and the second
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Marriot Case Brief 1. What is the weighted Average Cost of Capital for Marriot Corporation? WACC for Marriott Corp is 11.89 WACC of divisions: Lodging 10.29‚ Restaurant 13.49‚ Contract Services 13.615 a) What risk-free rate and the risk premium did you use to calculate the cost of equity? We used 8.95% as the risk free rate (LT Government Debt) and the MRP we used was 7.43%‚ which means are expected market return is 8.95+7.43=16.38% b) How did you measure Marriott’s cost of debt? We added
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Introduction Cooper Industries‚ Inc. is a manufacturer of heavy machinery and equipment. It has acquired some companies in the past as part of their expansion plans. Cooper acquires companies that are leading in their area of business‚ have a large market share and is the leading company in their area of operation. Currently‚ Cooper is focusing on building a hand tool business with a full product line that would use a common sales and distribution system and joint advertising. In this effort‚ Cooper
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Case Interco Introduction Interco is a shoe company founded in 1911. Its business has spread to other product through acquisitions. Equity analysts saw Interco as a conservative company that was not highly leveraged leading to high financial flexibility. This allowed the firm to repurchase share and make acquisitions when the opportunities were there. Interco has four major divisions; Apparel Manufacturing‚ General Retail Merchandising‚ Footwear Manufacturing and Retailing and Furniture and Home
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AES - Case Analysis & Write up How would you evaluate the capital budgeting method used historically by AES? What is good and bad about it? Previously‚ the economics of a given project were evaluated at an equity discount rate for the dividends from any project and as it was mostly financed through local debt‚ which was non-recourse to the parent company‚ AES use to evaluate the dividend cash flows at a standard 12%. It is a simple approach with portions of sound reasoning. One could argue that
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Case Study Nike Introduction Good morning ladies and gentlemen and thank for taking the time to meet with us. Nike was founded on January 25‚ 1964 as Blue Ribbon Sports by Bill Bowerman and Philip Knight. The company officially became Nike‚ Inc. on May 30‚ 1978. Nike has various products which include footwear as well as other apparel that compliment the former. This accounts for 92 percent of the company’s revenue. The other 8 percent comes from equipment and non Nike brand products‚ such as Cole
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