20 4.2.1 Performance of HVN: 20 4.2.2 Future prospects: 22 4.2.3 Operating Revenue Forecasting: 22 4.2.4 Free cash flow: 25 4.3 Weighted Average Cost of Capital (WACC) 25 4.3.1 Value of Debt and cost of debt: 25 4.3.2 Value of equity and cost of equity: 26 4.3.3 Weighted Average Cost of Capital (WACC): 27 4.4 Value of Harvey Norman Holding Ltd and estimated share price: 28 4.5 Sensitivity Analysis: 28 4.5.1 Operating revenue and
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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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internal rate of return related to the investment was not high enough to justify a purchase of the company. Peabody’s cost of debt was .038. This was calculated by assuming a 40% tax rate and .095 rate on debt (Exhibit 3). There was a .095 interest rate on notes payable due June 30‚ 1998; therefore‚ we assumed the rate of debt at the time of purchase would have been similar. Also‚ Peabody’s cost of equity was .1397. This was calculated by using a risk-free rate of .055‚ which was the rate of the 90-day T-bill
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9th 2007 Tata McGraw Hill R-3 Fundamentals of Financial Management Sharan Vyuptkesh 2nd 2008 Pearson Other Reading Sr No Journals articles as Compulsary reading (specific articles‚ complete reference) OR-1 The Cost of Capital for Alternative Investments- Harvard Business School Working Paper -http://www.hbs.edu/research/pdf/12-013.pdf ‚ OR-2 wing Your Nest Egg: Risk and Return-Iowa State University-http://www.extension.iastate.edu/publications/pm1821.pdf
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STUDY 1. Why is it important to estimate a firm’s cost of capital? What does it represent? Is the WACC set by investors or by managers? Weighted average cost of capital or WACC represents the overall cost of capital in the company. It takes into considerations cost of debt and cost of equity. As company’s value can grow by increasing its assets that could be financed either be debt or equity and cost of capital shows how much it costs to do that. Cost of capital is a very important component in financial
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how Navigation Systems‚ Inc. should handle the payment and the probable cost of each scenario. You know that your firm’s weighted average cost of capital is 9%. Assume that a going concern business will‚ at a minimum‚ recover the WACC to achieve at least a breakeven financial position. Therefore‚ any capital the firm has will generate at least the WACC in returns. Deliverable: Create an Excel spreadsheet detailing the cost of each scenario‚ and embed it into a Word document. Provide your recommendations
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Marriott’s financial strategy consistent with it’s growth objective? How does Marriott use its estimate of its cost of capital? Does this make sense? What is the weighted average cost of capital for Marriott Corporation? What risk-free rate and risk premium did you use to calculate the cost of equity? How do you measure Marriott’s cost of debt? Did you use arithmetic or geometric averages to measure rates of return? What type of investments would you value using Marriott’s WACC? If Marriott use a
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Investment Analysis and Recommendation Lester E. Downing H210 Professor Finance Les Roces-Gruyére University of Applied Sciences Submitted August 15‚ 2010 Investment Analysis and Recommendation Accor: Governance Accor is an international hotel group with corporate headquarters located in Paris‚ France. The company is publicly traded on the French stock exchange‚ the CAC 40. One of the largest hotel groups in the world (Sharkey‚ 2009)‚ Accor operates hotels throughout the world in
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firm who had a capital structure of 13.1B as I had previously stated * Their problem was to estimate the effect of a leveraged recapitalization. * By doing a leveraged recapitalization‚ this would have an impact on share value‚ debt rating‚ cost of capital‚ Earnings Per Share‚ and voting control. * Each of theses elements would effect the company in a different way * This will be discussed as we go throughout the remainder of the presentation DEBT RATING * Debt rating involved
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ONGC Ke – cost of equity |Rm – expected returns on emerging markets |13 | |Rf – risk free return |8.5 % | |Beta |0.2835 | |Ke = Rf + beta( Rm-Rf)
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