refer to your Essentials of Business I Corporate Annual Report project for the appropriate ratios.) Comment on the financial health of the company. Please look at ratio trends and compare to industry average. (4) WEIGHTED AVERAGE COST OF CAPTIAL (WACC): Estimate the components of the cost of capital for your company using market data. a)
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NIKE’S FINANCIAL RATIOS 3 Liquidity or Working Capital 3 Current Ratio 3 Quick Ratio 3 Working Capital 4 Efficiency and Asset Management 5 Total Asset Turnover 5 Fixed Asset Turnover 5 Days Sales Outstanding 5 Debt Management 6 Total liabilities to Total Assets 6 Long-Term Debt to Capital 6 Times Interest Earned (TIE) Ratio 7 Performance 7 Profit Margins 7 Return on Assets 8 Dupont Ratio 8 Bond Evaluation 9 Market Value of Debt‚ Debt Structure‚ Average maturity of Debt 9 Effect of Changing Interest
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the company invests in projects with a positive NPV and a irr higher then the set hurdle rate - relative to market interest rates‚ project risk‚ and estimates . then this is consistent with its strategy of growth Optimize the use of debt in the capital structure. by focusing on its ability to service its debt. The lower they can bring their debt percentage their value will increase and is consistent with its strategy of growth Repurchase undervalued shares Buys backs will result in a higher
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CASE QUESTIONS Cash Flows and Value. Cost of Capital Case 1: Hop-In Food Stores‚ Inc. 1. Determine the correct price for this particular IPO. Use several methods to do this and compare them. 2. What extra information would you try to acquire in a real life situation? Case 2: Chem-Cal Corporation 1. How do you calculate the WACC for this firm? 2. What is the cost of capital of the debt‚ preferred stock‚ and common stock (assume the equity beta is 1.22)? 3. Calculate the WACC. How can a WACC be used
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Cash-flow-based valuation. With this method‚ the value of a firm’s equity is equal to the net present of future cash flow discounted with the weighted average cost of capital (WACC) minus debt. As we don’t have access to data’s in the case‚ we will presume data’s based on research. Future cash flows: $1850 million (cash flow received in 2004) * 562‚ 5% of average estimated future cash flow per year (based on the evolution of the cash flow between 2002 and 2004) = $10.406 million of future cash flow
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range of support services. The company based in Haifa‚ Israel and currently has 12‚500 employees around the world mainly in the US. Elbit’s stock is traded in both TASE (Tel Aviv Stock Exchange) and the NASDAQ as ESLT. 4 Elbit Systems has an average risk level‚ which mainly affected by geopolitical risks that can affect the company sales‚ security budget in major markets such as Israel and the US. Ilit Raz EMBA – Dickens Cohort Jan 2013 Discount
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10lakhs‚cost of capital 18% Debt Rs.5lakhs‚cost of debt 13% Calculate the weighted average cost of funds taking market values as weights assuming tax rate as 40%. Answer: We Know that‚ WACC = We Ke + WpKp +Wr Kr + WdKd + WtKt WACC = 0.67*.18+0.33*13(1-.40) =0.146 or 14.6% A calculation of a firm’s cost of capital in which each category of capital is proportionately
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closer‚ while the working capital investment becomes lower with a lower customer credit risk. Financial forecast: The business plan has been developed looking at an exhaustive market analysis. Forecast data are reliable; they refer to the first five years. The target is to open 80 franchising shops within five years. Indeed‚ is that the optimal minimum number of shops in order to achieve the optimal minimal production output. The questions: 1) Which is the fair cost of capital for the company? 2) Which
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following report details USEC’s opportunity to embark on a massive capital-expenditure project known as the American Centrifuge Project (ACP). Currently‚ USEC is utilizing gas-diffusion technology to enrich uranium. 100 million dollars have already been invested with the Department of Energy (DOE) in the development of the ACP technology‚ and a balance of $1.6 billion would be required to execute the project. While the investment cost is significant‚ the ACP would provide distinct advantages for USEC
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rate has to be developed and the relevant valuation attribute in the year T + 1 should be constructed. This error is experienced in all three papers. The inconsistent discount rate error arises due to inconsistency between cost of equity capital and weighted average cost of capital. This error is experienced by Francis and Penman. The missing cash flow error exists due to an inconsistent way of calculating the valuation attributes. Courteau and Francis suffer this error. Therefore this article argues
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