Case Study –Nike‚ Inc.: Cost of Capital FIN202a-Spring 2011 1. Please define Weighted Average Cost of Capital (WACC). Write down the WACC formula‚ and discuss its components. WACC (Weighted Average Cost of Capital) is a market weighted average‚ at target leverage‚ of the cost of after tax debt and equity. It is a critical input for evaluating investment decision‚ and typically the discount rate for NPV calculation. And it serves as the benchmark for operating performance‚ relative to
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What is the appropriate goal of a firm? Maximization of shareholder wealth is said to be the primary goal of a firm. The financial manager has the responsibility to act in their best interests. Since‚ the common stockholders are the firm’s most important stakeholders to continue operate the business. This goal means that the financial manager can best serve business owners by identifying goods and services that add value to the firm because the market place desires and values what the firm offers
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The definition of capital city is “the city or town that functions as the seat of government and administrative centre of a country or region”. In my own words‚ I define capital city as a city that is really important to the country in terms of politics and economics and capital city occupies a special position in politics compared to other cities. So‚ normally government will put more resources into those cities development. Also I think capital city has different purpose in different period of
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JOURNAL OF FINANCE • VOL. LIII‚ NO. 4 • AUGUST 1998 Agency Costs‚ Risk Management‚ and Capital Structure HAYNE E. LELAND* ABSTRACT The joint determination of capital structure and investment risk is examined. Optimal capital structure ref lects both the tax advantages of debt less default costs ~Modigliani and Miller ~1958‚ 1963!!‚ and the agency costs resulting from asset substitution ~Jensen and Meckling ~1976!!. Agency costs restrict leverage and debt maturity and increase yield spreads
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For what purposes does Mortensen estimate Midland’s cost of capital? What would be the potential consequences of a too high estimate compared to the firm’s “true” cost of capital? What about a too low estimate? The purpose is that the cost capital will be used for capital budgeting‚ financial accounting‚ performance assessment‚ stock repurchases estimations. Also the cost of capital is a necessary basis for the expected growth and forecasted demand. The too high estimated cost of capital means
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Please forward the following two questions to the entire batch as directed by Sengupta sir. AS 2 Determine the cost of inventory of M/s XYZ International Limited involved in the import and trading of mobile phones as at March 31‚ 2011 in accordance with Accounting Standard – 2‚ Valuation of Inventories‚ from the following data (5000 phones) :- Purchase cost of phones – Rs 50‚000 Custom duty on Import – Rs 30‚000 Port clearing charges – Rs 10‚000 Carriage inwards – Rs 15‚000 Salary to
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population proportion. There are many other population parameters‚ such as the median‚ mode‚ variance‚ and standard deviation. The following are a few examples of estimation: an auto company may want to estimate the mean fuel consumption for a particular model of a car; a manager may want to estimate the average time taken by new employees to learn a job; the U.S. Census Bureau may want to find the mean housing expenditure per month incurred by households; and the AWAH (Association of Wives of Alcoholic
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– Free Rate 3% + Beta Coefficient .36 Market Risk Premium 8% Cost of Equity 5.88% + Risk - Free Rate 3.% Weighted Cost of Equity 3.52% X Percentage of Total Capital Supplied by Equity 60% + Before Tax Cost of Debt 5.66% WACC 5..00% Weighted Cost of Debt 1.53% Before Tax Operating Profit in % 100% After Tax Cost of Debt 3.83% X X After Tax Operating Profit in 67.6% 40% of Total Capital Supplied by Debt 40% - Income Tax Rate 32.4% Rate of Return of
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get T2n when you have Mn and Tn 2 4 3 n n T T S − = n ‚ for example 32 16 16 4 3 T T S − = A quick way to get Sn when you have T2n and Tn Best estimate based on calculated valuesMn and M2nobtained from a G.P. 2 4 3 M n − Mn "Best midpoint" = ‚ e.g. 16 8 4 3 M − M Use this for a quick best estimate when you have calculated two successive midpoint values like M8 and M16
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WHY IS LEADERSHIP DEVELOPMENT IMPORTANT? O’ Connell‚ Patricia. (Feb 2010). How Companies Develop Great Leaders. www. businessweek.com - The Best Companies for Leadership report investing more time developing future leaders - The best-in-breed companies spend more time and money developing leaders - 22% of the Best Companies for Leadership spend 25+ days developing their top talent - Creates an environment that drives performance - Removes obstacles that hinder people
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