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 an investment
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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 7E7 project from 2004 to 2037‚ Baseline estimated the
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investment opportunities in all its division. The firm should value its projects using a discount rate determined by the characteristics of the risk of the project rather than a single companywide discount rate. Different divisions have different weighted average cost of capital. If we use the single discount rate of the
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Financial Decision Making Final Project Case analysis: Marriott Corporation Introduction and background The Marriott Corporation‚ an American firm‚ was founded in 1927 by J.Willard Marriot.The company began as a small beer stand and soon began to sell food and provided lodging that expanded rapidly. With the help of his wife Alice‚ the family owned business had 45 restaurants in nine states by 1940 and grew into one of the leading service companies. The Company has three major lines
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break-even point of the project. Accepting any project beyond the break-even point will cause financial loss for the company. The cost of capital is a guideline for determining the optimum capital structure of a company. Weighted average cost of capital (WACC) WACC is the weighted average rate of return required by the suppliers of capital for the firm’s investment project. The suppliers of capital will demand a rate of return that compensates them for the proportional risk they bear by investing in the
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............................................................................................ 2 Enterprise Valuation ....................................................................................................................... 2 The Weighted Average Cost of Capital Approach ......................................................................... 2 The Adjusted Present Value Approach........................................................................................... 4 The Capital
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identified by calculating the cost of each kind of capital that the enterprise uses most like debt and equity. 2) What is meant by weighted average cost of capital (WACC)? What are some components of WACC? Why is WACC a more appropriate discount rate when doing capital budgeting? What is the effect on WACC when an organization raises long-term capital? a) Weight average cost of capital is calculated by averaging all of the capital costs acquired by an organization. b) Some components of WACC
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INTRODUCTION The long-term investments that make today will determine the value of business tomorrow. In order to make long-term investments in new product lines‚ new equipment and other assets‚ managers must know the cost of obtaining funds to acquire these assets. The cost associated with different sources of funds is called the cost of capital. . If the business earns more than its cost of capital‚ the market value of the business will increase. Likewise‚ if returns on long-term investments are
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Objectives The objectives of The Boeing 7E7 case study is to seek the answer for the project question. Why is Boeing contemplating the launch of the 7E7 project? Is this the good time to do so? How would we know if the 7E7 project will create 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
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BROTHERSON ET AL. – “BEST PRACTICES” IN ESTIMATING THE COST OF CAPITAL: AN UPDATE 15 “Best Practices” in Estimating the Cost of Capital: An Update W. Todd Brotherson‚ Kenneth M. Eades‚ Robert S. Harris‚ and Robert C. Higgins “Cost of capital is so critical to things we do‚ and CAPM has so many holes in it—and the books don’t tell you which numbers to use… so at the end of the day‚ you wonder a bit if you’ve got a solid number. Am I fooling myself with this Theories on cost of capital
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