recommend Worldwide Paper Company to use the 9.62% discount rate‚ the returns will be great only if everything remains like expected So I would like to recommend them to evaluate themselves at least yearly as things may change from year to year. 3. The WACC of 9.7% yields an NPV for the project of $0.8 million and an IRR of 11.1% Case 19 1. Worldwide Paper Company has an opportunity to take on a new project. With this project they would be considering an addition of a new on site Longwood wood yard
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This case study is based on an ethical dilemma due to a 2011 oil spill. Enbridge had an oil spill near Wrigley. Although the company has taken responsibility for the spill‚ the members of the community are uneducated people who live off the land. The members of the community do not understand the technical jargon buried in the 600 pages of documents the company has presented them with. To try and fix things they offered the community members $5‚000 to get a consultant. 1. The facts. Gather
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Week 2 Hill Country Snack Foods Case Summary: Hill Country Snack Food is a U.S. company involving business of manufacturing‚ marketing and distributing a variety of snacks. Having three components in its corporate culture‚ namely shareholder value-creation‚ cost efficiency and control and risk-avoidance‚ Hill Country’s growth was steady and debt was avoided. However‚ the company’s cash position and conservative capital structure has a negative impact on its financial performance measure‚ which
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Market premium 0.086 0.086 0.086 Cost of equity 13.88% 15.4% 20.8% WACC 13.88% 13.5% 13.8% EBIT $2‚103 $2‚103 $2‚103 - Taxes - 34% $1‚388 $1‚388 $1‚388 EBIAT $1‚388 $1‚388 $1‚388 + Depreciation $500 $500 $500 - Cap exp. $(500) $(500) $(500) FCF 1‚388 1‚388 1‚388 Value of assets $10‚000 $10‚281 $10‚058 The following are calculations for: 0% debt: Cost of equity = Rf + Bu (Km - Krf) = 0.07 + 0.8(0.086) = 13.88% WACC = WD*Kd+ Ws*rs = 0 + 13.88 = 13.88% NOTE THAT: Km - Krf = Market
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that Liedtke used base case assumptions to value Mercury‚ and also wanted to consider the value of possible synergies as well. FCFF Note: EBIT equals to the consolidated operating income‚ and the tax rate is 40%. Cost of equity‚ cost of debt‚ WACC and the leverage effect Assumptions: (1) Use 5-year U.S. Treasury obligation yield 4.69%‚ as the riskless rate for the period would correspond with the 5-year period of foreseeable cash flows. (2) For risk premium = expected market return
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Mid Exam Assigment Coke Versus Pepsi‚ 2001 Analysis Company Background The Coca-Cola Company : In 2000‚ Coca-Cola Company’s (KO) annual sales were $20‚5 Billion and its market value reached $110‚1 Billion. The company was the largest manufacturer‚ distributor and marketer of soft-drin concentrates and syrups in the world‚ and also marketed and distributed a variety of non carbonated-beverage product‚ which included minute maid orange juice‚ Fruitopia‚ Dasani bottled water‚ and Nestea‚ among
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VI. WACC VII. Conclusion VIII. References I. Executive Summary Midland Energy Resources is a global energy company with operations in oil and gas exploration and production(E&P) providing a broad array of products and services to upstream oil and gas customers worldwide including refining and marketing (R&M)‚ natural gas‚ and petrochemicals. Janet Mortensen‚ the senior vice president of project finance for Midland Energy Resources must determine the weighted average cost of capital (WACC) for
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Bendigo Bank Case Study 2011 Question (1): Capital Structure and Financing in the Banking Industry Introduction Australian banks are an interesting case of capital structure and financing considerations as far as companies go‚ in that they are regulated in a number of ways by the Australian Prudential Regulatory Authority (APRA) and the Reserve Bank of Australia (RBA). Considerations of capital structure have the effect of reducing the cost of capital and so in turn increase the value
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might miss profitable projects. Conversely‚ when the cost of capital is underestimated‚ more projects will have positive or large NPV and generate an IRR greater than the cost of capital‚ the company might accept projects leading to losses. 2. WACC = rd(D/V)(1-t)+re(E/V) According to Table 1: D/V=42.2%; Spread to treasury(Premium)=1.62% • According to Table 2: Because the majority of large firms and financial analysts report using long-term yields to determine the risk-free rate‚ so we
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Week 13 Solutions Chapter 19 14. WACC – Table 19.4 shows a simplified balance sheet for Rensselaer Felt. Calculate this company’s weighted-average cost of capital. The debt has just been refinanced at an interest rate of 6% (short term) and 8% (long term). The expected rate of return on the company’s shares is 15%. There are 7.46 million shares outstanding‚ and the shares are trading at $46. The tax rate is 35%. We make three adjustments to the balance sheet: Ignore deferred taxes; this is an
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