MEMO To: Warren East‚ Chief Executive Officer – ARM Holdings From: Team 8 Consultants Date: April 3‚ 2012 Subject: XXXXXXXXXXXXXXXX DECISION SUMMARY Should JBT buy Key Technologies’ sorter division for $50 Million? To answer this question‚ our team conducted an examination of the value the division will provide to both your company and your customers‚ and the effects the purchase will have on your company’s financials and yearly marketing goals. After
Premium Weighted average cost of capital Net present value Revenue
Relative Comparison of Billabong Dividend Policy to similar firms 14 4.4 Relationship Between the Company’s Characteristics and Dividend Policy 15 4.5 Alternatives to Dividend Payments 16 4.6 Optimal Dividend Policy 16 5.0 Valuation 18 5.1 Weighted Average Cost of Capital (WACC) 20 5.2 Estimation of Share Price 23 5.3 Sensitivity Analysis 25 5.4 Comparison between the calculated and actual share price 28 5.5 Investment Decision 28 6.0 References 29 7.0 Appendix 30 1.0 Introduction Company
Premium Corporate finance Dividend Capital structure
FBE 421 Marriott Corporation ------------------------------------------------- Introduction Founded in 1927‚ Marriott Corporation has become one of the leading food service companies in the United States. As of 1987‚ Marriott recorded a profit of $233 million on sales of $6.5 billion and retained a high sales growth rate of 24%. Marriott runs on three major lines of business lodging‚ contract services‚ and restaurants. Lodging division which includes 361 hotels generated 41% of 1987 sales
Premium Weighted average cost of capital Debt Net present value
Consequently‚ the company’s growth would be hurt as well. Hence‚ the calculation of costs of capital for use as hurdle rates is essential for managing the company’s growth. The cost of capital is computed using Weighted Average Cost of Capital (WACC) technique which is the weighted average of cost of equity and cost of debt of the firm or division. The cost of debt is the current borrowing rate at the time of the analysis (1988). The costs of floating rate debt and fixed rate debt are determined for
Premium Weighted average cost of capital
of return. The case recounts the debate within the company over the use of a single hurdle rate to evaluate all segments of the company versus a riskadjusted hurdle-rate system. The tasks for the student are to resolve the debate‚ estimate weighted average costs of capital (WACCs) for the two business segments‚ and respond to the raider. Suggestions for complementary cases: “Nike Inc.” (case 13) gives an introductory exercise in the estimation of the cost of capital. “Coke vs. Pepsi‚ 2001”
Premium Weighted average cost of capital
Case #3 “Marriott Corporation” The Cost of Capital” What is the weighted average cost of capital for the Marriott Corporation and cost of capital for each of its divisions? – What risk-free rate and risk premium did you use to calculate the cost of equity? – How did you measure the cost of debt? – How did you measure the beta for each division? Solution What risk-free rate and risk premium did you use to calculate the cost of equity? – Risk-free rate proxy The risk-free
Premium Arithmetic mean Weighted average cost of capital Average
days‚ because the recent negative impact would be decreased if it were viewed in a longer period. The estimated betas of Boeing against the S&P 500 and the NYSE composite index using 60 trading days data are 1.45 and 1.62 respectively. If the weighted average cost of capital (WACC) of this project could be lower than its internal rate of return (IRR) with the estimated beta of 1.62‚ the estimated beta of 1.45 would not cause the project to be rejected. Therefore‚ the analysis uses the estimated beta
Premium Net present value Weighted average cost of capital Internal rate of return
back to the end of the forecast period at the weighted average cost of capital. HV is = to Free Cash Flow for 2011 = 34.96 * Growth Rate of 6% / Weighted Average Cost of Capital 11% less – the growth rate of 6%. HV for 2011 = [$34.96(1.06)]/ (0.11-0.06) = $741.152 million is the Horizon Value on 12/31/2011. C. Value of operations is the present value of all the future free cash flows expected from operations when discounted at the weighted average cost of capital‚ and is expressed as: Value
Premium Free cash flow Generally Accepted Accounting Principles Balance sheet
2012 Abstract To sustain further improvements to a company’s bottom line and profitability‚ Guillermo’s Furniture is completing a pro-forma cash flow analysis that includes net present value (NPV)‚ internal rate return (IRR)‚ and weighted average cost control (WACC) analysis’. The plan is to incorporate a merger of a high tech furniture business‚ a broker distributer business‚ or the status quo manufacturing. The issues driving these analysis decisions are the facts that a company located
Premium Net present value Cash flow Weighted average cost of capital
Chapter 6: Discussion Question #4 (p. 223) 4. Why is it usually easier to forecast sales for seasoned firms in contrast with early-stage ventures? Typically‚ it is easier to forecast a seasoned firm’s sales to that of an early-stage venture because the seasoned firm will have an operational history. Basing current sales on historical data is easier to do than trying to estimate sales based on little to no historical data to benchmark from. If you are a start-up / early-stage venture and
Premium Generally Accepted Accounting Principles Financial ratios Investment