Midland Energy Resources‚ Inc. 1.The Use of Cost of Capital First of all‚ cost of capital is an essential component in WACC. WACC is composed of cost of equity and cost of debt.The Mortensen’s estimates are used in various ways including asset appraisals for both capital budgeting and financial accounting‚ performance assessments‚ M&A proposals and stock repurchases at division ‚business unit level and corporate level. 2. The Calculation for Wacc Midland’s wacc at the corporate level
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and make a recommendation of a financial decision. The paper must also include a justification for your recommendation. Create a pro forma cash flow budget for the organization for at least the next 5 years. Determine the optimal weighted average cost of capital and discuss the use of multiple valuation techniques in reducing risks. Calculate net present value of future cash flows for each of the alternatives. Format your paper consistent with APA guidelines. Make sleep
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the approval of the board‚ Bair would need to complete a valuation of the 7E7 project and prove that the project would be profitable for Boeing’s shareholders. II. Alternative Solutions 1. Determine Boeing’s Net Present Value (NPV) 2. Use Weighted Average Cost of Capital (WACC) III. Analysis of Alternatives NPV (Net Present Value) In finance‚ the net present value (NPV) or net present worth is defined as the sum of the present values of incoming and outgoing cash flows over a period of time
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Coca-Cola Amatil Limited (CCL) is one of the largest companies in beverage industry in the Asia-Pacific region‚ and its shares are traded on the Australian Securities Exchange. In the following‚ we will estimate CCL’s cost of equity‚ cost of debt and weighted average cost of capital (WACC) separately‚ and detailed calculations will be shown in the Excel file. First we use historical beta to estimate the beta of Coca-Cola Amatil Limited. The conventional approach for estimating the beta of
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future free cash flows for the company‚ and brought it back to NPV using the company’s weighted average cost of capital (WACC). The WACC calculated uses information provided in the case‚ and some market information. We came to 14.84% company’s WACC (Exhibit XX). As sensitive case‚ we weight the three scenarios with different weight. Seagate performs better than average even with their low profit margin average. For this reason‚ we averaged the NPV of the down case at 20%‚ the base case at 50%‚ and
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and infectious disease‚ Boeing would need to weigh all considerations before making final decision to proceed the plan. In this case‚ we cautiously made assumptions when estimating cost of debt‚ commercial-defense beta ratio‚ risk free rate and risk premium. And finally estimated the project’s weighted-average cost of capita l(WACC) against the given internal rates of return(IRR). 2. Capital Budgeting Decision Rule According to detailed free cash flow forecast for the
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dividends paid during the third year. Group X‚ can you ask a group to answer this question. Part (b) asks us to compute the dividends paid per share during the third year for each of the three classes of shares. Let’s see Part (c)‚ what was the average issue price of each type of preference shares? The stockholders’ equity section of the balance sheet reports no additional paid-in capital. Thus‚ the preferred shares must have been issued at their respective par values ($50 per share for the
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million shares at a price of 418.50 per share. How should such a buyback affect Blaine? Consider the impact on‚ among other things‚ BKI’s earnings per share and ROE‚ its interest coverage and debt ratios‚ the family’s ownership interest and the company’s cost of capital. 4) As a member of Blaine’s controlling family‚ would you be in favor of this proposal? Would you be in favor of it as a non family shareholder? 5) How does the proposal sketched above differ from a special dividend of $4.39 per
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value? How to estimate the WACC? Is there anything else the board of directors should consider in assessing the financial appeal of this project? Why might the board vote ’yes’ on the 7E7‚ when the cost of capital estimate is greater than the IRR? Why might the board vote ’no’ if the cost of capital is less than the IRR? What should the board do? Introduction Ultimately Boeing needs to determine if the project will be profitable and if it will have positive cash flows in accordance with
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the decision making process‚ clarifying the economic objectives and setting up a target for value creation. The paper highlights the capability of EVA measure to fix some weaknesses of the accounting earnings perspective and proposes some reforms: • Cost of equity must be brought into the light of day as a key element for the economic profit. Shareholders need and
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