assets. Also include short term sources of capital like accounts payable and accruals dealing with noninterest bearing liabilities and short term interest bearing debt like notes payable b. The comptroller currently finds the weights for the weighted average cost of capital (WACC) from information from the balance sheet shown in Table 2. Compute the book value weights that the comptroller currently uses for the company’s capital structure. Item Amount Weight Long term bonds 40000 / 129297 or 30
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minimizes the overall cost of funding‚ i.e. it should minimize the company’s weighted average cost of capital. In practice‚ however‚ it is not possible to specify this optimal capital structure exactly‚ for any individual company. It clearly makes sense to obtain funds at the lowest possible cost. In the long run‚ debt is cheaper than equity. However‚ when a company’s financial leverage increases as it takes on more debt capital‚ there is an increasing risk for stockholders. The cost of equity therefore
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critical function‚ viz. assist in maximizing the Value of the Firm. Part of the weakening of the practice of corporate financial management has to do with recent distortions in the data normally used in making such fundamental calculations as Weighted Average Cost of Capital. Another cause is the lack of uniformity in following the processes involved in such measurements. But another cause of concern is the 1 tendency to either ignore the fundamental tenets of the profession‚ or to demonstrate a puzzling
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rates 7 Components of weighted average cost of capital (WACC) 7 Free cash flows and economic profit 7 BIBLIOGRAPHY 9 SUMMARY As a student analyst for Drake University’s Krause Challenge Fund‚ I have conducted a financial analysis and valuation of Olin Corporation‚ a producer of Chlor Alkali products and Winchester ammunition. Olin has recently undergone restructuring and acquired the other half of a previously owned subsidiary‚ which I expect to reduce operating costs. The current market price
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Chemical Corporation‚ another typical chemical company in 1979. Dixon wants to diversify its product line buy acquiring the aforesaid plant‚ which produces sodium-chlorate to supply to paper producers in Southeastern part of the US. This plant initially cost 12 mln. USD and additional 2‚25 mln. USD needed to buy laminate technology to increase efficiency and profitability of the plant in order. Dixon has conducted thorough marketing research for the industry providing cash flow analysis on purchase of
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comfortable with another competitor that shares a geographical location‚ and many times‚ the same markets. Competition is a given concept that each business will become familiar with eventually. Changing the manufacturing process‚ cutting excessive costs‚ and changing the practice of business will benefit an organization to become more competitive within its market. Changing the business plan is a common theme when faced with enormous business challenges. This is one technique that may assist‚ grow
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(millions) 2011 118 2012 83 2013 86 2014 88 2015 91 Operating Cash Flow (millions) 2011 118 2012 83 2013 86 2014 88 2015 91 We then determined a WACC of 5.37% based on a cost of equity of 8.85% (calculated with beta of 1.76‚ risk fee rate of 0.05%‚ and market risk premium of 5%) and estimated the cost of debt at 6%. Then‚ we calculated the discounted cash flows (DCF = OCF / (1 + WACC)^Period): Discounted Cash Flow (millions) Period 2011 112.33 1 2012 75.12 2 2013 73.43 3
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Topic: Bonds 6) Sun co.’s bonds‚ maturing in 7 years‚ pay 8% interest on a $1‚000 face value. However‚ interest is paid semi-annually. If your required rate of return is 10%‚ what is the value of the bond? How would your answer change if the interest were paid annually? 7) Sharp Co. bonds are selling in the market for $1‚045. These 15 year bonds pay 7% interest annually on a $1‚000 par value. If they are purchased at the market price‚ what is the expected rate of return? 8) You own a bond
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Cost of Capital Estimate for Midland Energy Resources‚ Inc. In the first section of my report‚ I list out the main models and methods applied to estimate the cost of capital for Midland’s three divisions‚ general assumptions made and the corresponding justifications. In the second section‚ Calculations‚ I not only compute the cost of capital based on the general assumptions previously made‚ but also discuss specifics of each division and the additional adjustments or assumptions made to justify
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Harvard Business School 9-289-047 Rev. April 1‚ 1998 Marriott Corporation: The Cost of Capital (Abridged) In April 1988‚ Dan Cohrs‚ vice president of project finance at the Marriott Corporation‚ was preparing his annual recommendations for the hurdle rates at each of the firm’s three divisions.部门 要求报酬率 Investment projects at Marriott were selected by discounting the appropriate cash flows by the appropriate hurdle rate for each division. In 1987‚ Marriott’s sales grew by 24% and its return on equity
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