Chapter 8 The Cost of Capital 236 CHAPTER 8—THE COST OF CAPITAL TRUE/FALSE 1. Capital refers to items on the right-hand side of a firm’s balance sheet. 2. The component costs of capital are market-determined variables in as much as they are based on investors’ required returns. 3. The cost of debt is equal to one minus the marginal tax rate multiplied by the coupon rate on outstanding debt. 4. The cost of issuing preferred stock by a corporation must be adjusted to an after-tax
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THE ROLE OF DIVIDEND POLICY IN STOCK PRICE DETERMINATION IN TELECOMMUNICATION INDUSTRY: THE CASE OF PLDT AND GLOBE FATIMA KAYE A. DE CHAVEZ‚ LORELLA A. ESPELETA and LESLIE JOY A. PATIO College of Business and Accountancy University of Batangas ABSTRACT The issue of how much a company should pay its stockholders‚ as dividend is one that has been of concern to managers for a long time. The optimal dividend policy of a firm may be defined as the best dividend payout ratio the firm can adopt
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Burns) participants have been shown a sequence of slides depicting‚ say‚ a car accident at a junction where there is a Stop sign. If participants subsequently read a description of the accident which refers to a Yield sign‚ they will be misled into believing that the sign was indeed a Yield sign. On a final recognition memory test misled participants are much less likely to select the correct slide than non-misled participants. Takarangi‚ Parker‚ and Garry developed video materials for demonstrating
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GLOBAL MARCH 2‚ 2009 CORPORATE FINANCE Financial Strategy Carsten Stendevad (212) 816-3808 carsten.stendevad@citi.com New York Anil Shivdasani Cut or Continue? The Dividend Decision for 2009 (212) 816-2348 anil.shivdasani@citi.com New York Shams Butt +44 (20) 7986-2517 shams.butt@citi.com London This client report has been prepared by members of Citi’s Investment Banking Division. This is not a research report and does not constitute advice on investments
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National Foods Financial and Operating Highlights: | Unit | 2012 | 2011 | 2010 | 2009 | 2008 | Profitability Ratios | | | | | | | Gross Profit Ratio | % | 32.52 | 28.51 | 29.55 | 29.97 | 32.20 | Operating Profit to Sales | % | 12.66 | 8.83 | 5.76 | 8.18 | 9.48 | Net Profit to Sales | % | 8.14 | 4.18 | 1.93 | 3.71 | 5.11 | EBITDA Margin to Sales | % | 14.02 | 10.62 | 7.85 | 10.40 | 11.33 | Operating Leverage Ratio | % | 288.57 | 385.63 | (81.89) | 26.28 | 159.98 | Return on
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per share‚ then: The dividend per share of preferred stock = $50 * 6.5% = $3.25 Total Preferred Dividends = 10‚000 shares * $50 * 6.5% = $32‚500 Suppose the preferred stock is trading at $60 per share‚ and you want to calculate thedividend yield: Dividend Yield Ratio = (Dividend Per Share / Market Price Per Share) * 100% = (3.25 / 60) * 100% = 5.4% UNDERSTAND EQUITY MARKET- PREFERRED STOCK Preferred stocks (or preference shares) are different from common stocks. They generally do not have voting
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Inditex Valuation IE business school 7/24/2013 1. Background 1.1 Company overview Inditex is one of the world largest fashion retailers with more than 5‚500 stores in 86 countries. The most famous brand that Inditex owns is Zara which opened its first store in 1975 in A Coruña‚ Spain. Besides Zara‚ Inditex also owns brands such as Pull&Bear‚ Massimo Dutti‚ Bershka‚ Oysho‚ Zara Home and Uterque. The growth of this company has been dramatically strong and steady for more than 10 years
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PRODUCTS In-arrear swaps are popular products in a steep yield curve environment to a fix rate receiver who thinks that short term rates will not rise as fast as the yield curve predicts‚ pocketing up the difference between the fix rate of the standard swap and the one of the in-arrear swap known as the pick up‚ while still paying low Libor resets. Usually‚ clients (corporates or financial institutions) receive fix and pay floating. In a steep yield curve environment‚ because of the delayed resets‚ an
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Ratio calculations ROTA (Return on total assets): ROTA = (PBIT * 100) / (Total assets - intangible assets) 2008 = (-7‚415 * 100) / (149‚918 – (36‚352 + 1‚571) = - 6.62% 2009 = (-12‚042 *100) / (134‚179-(34‚598-988)) = - 12.21% Profit Margin: Gross margin = (PBIT * 100) / Sales 2008 = (-7‚415 * 100) / 294‚414 = - 2.52% 2009 = (-12‚042 *100) / 267‚551 = - 4.50% Return on capital employed (ROCE): = PBIT / (Total assets-current liabilities) =2008 = (-7‚415
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Corporate Finance Case 1 1. To calculate the present value of future cash flow in 2013‚ we first calculate the free cash flow between 2014-2020: Table 1: Free cash flow of 2014-2020 (in $million) After-tax profits Depreciation Gross investment in fixed assets Investment in net working capital Free cash flow 2014 2015 2016 2017 2018 2019 2020 5.25 2.40 5.70 3.10 3.00 3.12 3.40 3.17 4.35 3.26 6.00 3.44 7.60 3.68 (4.26) (10.50) (3.34) (3.65) (4.18) (5.37) (6.28) (1.39) (0.60)
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