returns. - Calculate the value and yield of corporate bonds‚ preferred stocks‚ and common stocks. - Evaluate financial assets and portfolios using fundamental analysis‚ modern portfolio theory‚ CAPM‚ and capital structure. - Calculate the weighted average cost of capital for a firm‚ and explain how to determine target capital structure. - Understand payout policy (by dividend‚ or share repurchase). - Use MS excel in all above calculations and analyses. Text books: Eugene Brigham and Michael
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bonds yielding 8%. The remaining long term debt will be at 7%. The marginal tax rate will remain the same. What will be Bickley’s new Beta with this new 15/85 capital structure? What is the WACC (Weighted Average Cost of Capital) of Bickely with its 30/70 capital structure? Bickley’s average borrowing rate with this capital structure is 7.5%. What will be Bickley’s WACC with its 15/85 capital structure? PROBLEM BASED ON CHAPTER 26 – MODIGLIANI & MILLER EXTENSION MODELS WITH GROWTH ASSUMPTIONS
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and external equity? Q4: The Patrick company’s cost of common equity is 16%. Its before tax cost of debt is 13% and its marginal tax rate is 40%. The stock sells at book value. Using the following balance sheet‚ calculate Patrick’s after tax weighted average cost of capital: Q5: Hook industries has a capital structure that consists solely of debt and common equity. The company can issue debt at 11%. Its stock currently pays a $2 dividend per share (D0 =$2)‚ and the stock’s price is currently
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ACC 4291 – Integrated Case Study Case Analysis Report on Living by Numbers – Value Creation or Profit? The summary This case basically explains about the dilemma that faced by Hafiz Hashim who is the CFO of MarineCorp Sdn Bhd (MarineCorp). This company was incorporated in 1992 and was a subsidiary of SURIA. MarineCorp has two wholly subsidiaries which are Green Port Sdn Bhd (GreenPort) and Sungai Emas Port Sdn Bhd. Its main operation was the maritime solutions providers for the SURIA group of
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COST OF CAPITAL Directed Silicon Valley Medical Technologies - SIVMED was found in San Jose‚ CA‚ in 1982 by Kelly’s O’Brien‚ David Roberts‚ and Barbara Smalley. O’Brien and Roberts‚ both MDs‚ were on the research faculty at the UCLA Medical School at the time; O’Brien specialized in biochemistry and molecular biology‚ and Roberts specialized in immunology and medical microbiology. Smalley‚ who has a PhD‚ served as department chair of the Microbiology Department at UC-Berkeley. The company
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of firm and decrease the value of overall cost of capital. Debt is cheap source of finance because its interest is deductible from net profit before taxes. After deduction of interest company has to pay less tax and thus‚ it will decrease the weighted average cost of capital. For example if you have equity debt mix is 50:50 but if you increase it as 20: 80‚ it will increase the market value of firm and its positive effect on the value of per share. High debt content mixture of equity debt mix
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Pioneer Petroleum Cases Analysis The Problem: Pioneer Petroleum Corporation (PPC) has two major problems that are interfering with the goal of the firm to maximize shareholder wealth. The first is that PPC has been calculating their weighted average cost of capital incorrectly‚ by incorrectly calculating their after tax cost of debt and their cost of equity. This miscalculation has subjected PPC to more risk and has hurt the company’s ability to make appropriate investment decisions. This has
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coefficient is 1.2. The required return on an average stock in the market is 13 percent‚ and the risk-free rate is 7 percent. Roland’s A-rated bonds are yielding 10 percent‚ its risk premium is 4% and its current stock price is $30. Which of the following values is the most reasonable estimate of Roland’s cost of retained earnings‚ ks? a. 10% b. 12% c. 14% d. 20% e. 26% 2. If a firm can shift its capital structure so as to change its weighted average cost of capital (WACC)‚ which of the following
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online grocery store‚ so the average value of the range is better to use to avoid overlapping error that influences the final decision. Pro-forma income statement for the next 6 years is following: Traditional grocery store Online grocery shopping Because the capital structure of Crisp Markets consists of 70% equity and 30% debt‚ and debt is with a loan interest rate of 7.2%‚ it is essential to calculate the discount rate based on the weighted average cost of capital (WACC)‚ which
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US Company I - BUSINESS SUMMARY Amazon.com‚ Inc. (Amazon)‚ incorporated on May 28‚ 1996‚ is an American company listed on the Nasdaq. It operates retail web sites and provides programs that enable third parties (3P) to sell products on its web sites. The Company sources and sells a range of products to its customers and also manufactures and sells Kindle devices. It operates in two segments: North America and International. In May 2012‚ Amazon acquired Kiva Systems‚ Inc. II -
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