Torrington as a stand-alone entity is $1.181 billion. However‚ the maximum purchase price for Torrington should only be $641 million. The optimum debt amount for this transaction would be $301 million. This amount of debt would result in a total debt to capital ratio for Torrington of 47%‚ within the range for a BBB “investment grade” debt rating. The combined entities‚ Torrington-Timken‚ would produce an interest coverage ratio of 3.2‚ and a debt ratio of 45%‚ again within the range for a BBB “debt rating
Premium Discounted cash flow Weighted average cost of capital
Apple ’s financial performance continued to strengthen over the last several quarters. In the most recent earnings announcement‚ Apple reported significant growth in net revenues driven by the strong performance of its iPod product line. Net sales for the 2nd quarter grew to $4.36 billion‚ which is a 34% increase over 2nd quarter 2005 results. Net income increased by 41% to $410 million. (Apple Reports)The iPod product line continues to drive the financial performance of the company. In the 2nd quarter
Premium Revenue Weighted average cost of capital Cash flow
Pedal Pusher will also glow in the dark and will provide a musical sound as the bicycle is pedaled. Phil is seeking some financial help in developing working prototypes. Since the venture is still in the idea stage and searching for prototype capital‚ the venture would be classified in the development stage. While in this stage‚ the venture will be making efforts to obtain seed financing‚ which typically comes from the entrepreneur’s assets or from family and friends. B. Petal Providers
Premium Generally Accepted Accounting Principles Financial ratios Balance sheet
total cost of the operating capital. EVA is simply the after-tax operating profit minus the total annual cost of capital. Using EVA has advantages as well as disadvantages. Advantages · EVA sends the message than managers should invest only if the increase in earnings is enough to cover cost of capital · EVA allows a good way for companies to set a reward system that is not overly expensive to implement because is not too difficult for top management to monitor. · EVA makes the cost of capital
Premium Coca-Cola Pepsi Weighted average cost of capital
forms of business organization. 4. Corporations have the ability to raise larger sums of capital than the other forms of business organization. Objective: Explain how financial markets work in the United States. 2. Which of the following is NOT an advantage of a private placement (as compared to a public offering)? 1. Greater financing flexibility 2. Lower flotation costs 3. Lower interest costs 4. Quicker availability of funds Objective: Assess the role of ethics and compliance
Premium Corporate finance Net present value Finance
Bank Case Study 2011 Question (1): Capital Structure and Financing in the Banking Industry Introduction Australian banks are an interesting case of capital structure and financing considerations as far as companies go‚ in that they are regulated in a number of ways by the Australian Prudential Regulatory Authority (APRA) and the Reserve Bank of Australia (RBA). Considerations of capital structure have the effect of reducing the cost of capital and so in turn increase the value of the
Premium Corporate finance Finance Weighted average cost of capital
profitable operations every year since 1932‚ and held approximately a 60-65% market share by 1984. Sales had been increasing annually at about a 7% compound rate‚ and the return on average invested capital was about 20%. The cost structure of the company was 100% equity‚ owned solely by Mr. Case. The capital budget was the leftover earnings generated from internal operations minus the amount Mr. Case wished to withdrawal as income (dividends) for the year. Also‚ the seasonal accumulation
Premium Internal rate of return Net present value Investment
stockholders. They planned to exchange each share of Nicholson common stock for one share of VLN preferred stock‚ worth a minimum of $53.10. After doing a discounted cash flow analysis‚ it was determined that Nicholson stock is undervalued. When the cost benefits are achieved the company is extremely undervalued. Therefore‚ Cooper could acquire Nicholson on friendly terms with a large premium to attract the majority of the shares needed. Cooper has never “made an ‘unfriendly’ acquisition and this
Premium Stock Stock market Weighted average cost of capital
500 per month (฿2‚152‚000/year). The Phuket Hotel is responsible for the repair and maintenance of the facilities (i.e. toilets‚ elevators) and has prorated this cost over the next 4 years to be an additional ฿10‚000 per year for Planet Karaoke. The total revenue over the next 4 years is estimated to be ฿8‚404‚000. The projected capital expenditure for the hotel is between ฿770‚000 and ฿1‚000‚000. We will assume this expenditure is ฿885‚000. It is predicted that unwelcome guests at the Planet Karaoke
Premium Net present value Weighted average cost of capital Cash flow
restaurants. However‚ this is a complicated process because finding beta‚ cost of debt‚ and cost of equity in order to find weighted average cost of capital‚ or WACC‚ must be calculated using proxy firms and divisional data. The firm’s use of WACC is directed towards analysis of the company’s future capital investments. Specifically‚ firms use it as a discount rate in determining a projects profitability versus the cost of taking it on. A firm-wide WACC is a beneficial tool for determining whether
Premium Weighted average cost of capital Finance