Using the discounted cash flow model approach and Liedtke’s base case projections, the value of Mercury was estimated to be approximately $421,437,699. The free cash flows for Mercury Athletic Footwear from 2007 to 2011 were calculated from Liedtke’s projections of Mercury’s performance and balance sheet (Exhibit 6 and 7). From Liedtke’s projected performance of Mercury Athletic Footwear, earnings before interests and taxes (EBIT) was evaluated from the consolidated revenue and operating expenses
Words: 472 - Pages: 2
of financial data for XYZ, this assignment will help you better understand how theoretical stock prices are calculated and how prices may react to market forces such as risk and interest rates. You will use both the CAPM (capital asset pricing model) and the constant growth model (CGM) to arrive at XYZ's stock price. To receive full credit on this assignment, please show all work, including formulae and calculations used to arrive at financial values. Assignment Guidelines: •Find an estimate of
Words: 805 - Pages: 4
the risky projects the same way they do riskless projects. Here we have highlighted the two appropriate methods used to value risky projects, the Risk-Adjusted Discount Rate method and the Certainty Equivalent Method. TRACKING PORTFOLIOS AND REAL ASSET VALUATION Portfolio tracking is monitoring a collection of stocks, for the purpose of learning how the prices move and/or profiting from those movements. The market price of a combination of financial investments that track the future cash flows
Words: 2911 - Pages: 12
WAL MART Financial Analysis Managerial Finance FI515 Keller Graduate School of Management of DeVry University Introduction and Overview The history of Wal-Mart can be traced back to 1940s when Sam Walton began his career in retail at JC Penny. Walton would only stay at JC Penny for 18 months before begging his career as a entrepreneur. On May 9, 1950, Walton purchased a store from Luther E. Harrison in Bentonville, Arkansas, and opened Walton's 5 & 10
Words: 3341 - Pages: 14
A s ae o . s h r d n. . Surname: ______________________ Given names: ___________________ Student ID number: ______________ Signature: ______________________ Q1 Q2 Q3 Q4 THE UNIVERSITY OF NEW SOUTH WALES SCHOOL OF BANKING AND FINANCE FINS2624 PORTFOLIO MANAGEMENT FINAL EXAMINATION – SESSION 2, 2010 1. Time allowed – 3 hours 2. Reading time – 10 minutes 3. This examination paper has 22 printed pages 4. There are two parts. Part A has 70 multiple-choice questions, 1 mark each. Part B has
Words: 5954 - Pages: 24
ef Concepts • Cost of capital is the rate of return that a firm must earn on its project/ investments to maintain its market value and attract funds. • Business risk is the risk to the firm of being unable to cover fixed operating costs. • Financial risk is the risk of being unable to cover required financial obligations such as interest and preference dividends. • Explicit cost is the rate that the firm pays to procure financing. • Implicit cost is the rate of return associated with the best
Words: 388 - Pages: 2
Description of CAPM. The Capital Asset Pricing Model CAPM was introduced by Treynor ('61), Sharpe ('64) and Lintner ('65). By introducing the notions of systematic and specific risk, it extended the portfolio theory. In 1990, William Sharpe was Nobel price winner for Economics. "For his contributions to the theory of price formation for financial assets, the so-called Capital Asset Pricing Model (CAPM)." The CAPM model says that the expected return that the investors will demand, is equal to:
Words: 701 - Pages: 3
of directors to calculate the company’s cost of capital accurately in order to apply it into several vital analyses of the corporation. This paper aims to estimate the corporate and divisional cost of capital for the next fiscal year and along with the estimations, several assumptions and arguments will be discussed to provide better overview and understanding of the whole process to the managers. II. INTRODUCTION TO WEIGHT AVERAGE COST OF CAPITAL (WACC): WACC is the weight average of the expected
Words: 1267 - Pages: 6
using the Capital Asset Pricing Model (CAPM). A risk-free rate of approximately 4% can be extrapolated from the yields for 10-year and 30-year Treasury securities (approximately 3.5% and 4.4% respectively) for long-lived assets such as AT&T’s network. Based on empirical observation, a 7% historical market risk premium has been observed in the stock market. Finally, we have estimated the beta of AT&T’s equity to be 1.0, which we feel is more indicative of the riskiness of the company’s assets than the
Words: 342 - Pages: 2
MIHIR DESAI Globalizing the Cost of Capital and Capital Budgeting at AES In June 2003, Rob Venerus, director of the newly created Corporate Analysis & Planning group at The AES Corporation, thumbed through the five-inch stack of financial results from subsidiaries and considered the breadth and scale of AES. In the 12 years since it had gone public, AES had become a leading independent supplier of electricity in the world with more than $33 billion in assets stretched across 30 countries and 5 continents
Words: 8674 - Pages: 35
