1. Calculation of WACC of a Multi-Division Corporation 2. Sources of Data and their limitation 3. Use of CAPM, Cost of Equity, Effect of Leverage on the Ce, WACC 4. Use of data for comparable to estimate asset betas for division-specific cost of capital 5. Biases and Limitations No financial modeling. In the previous years they would include WACC as part of case study 3 – Now it has been changed to 2 – without any actual financial statements. No excel modeling. Focused on how to address
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Kelly Services, Inc. Group 7 Has Kelly Services Inc. underperformed or outperformed its competitors? On what dimensions? Financial ratios are great indicators to find a firm’s performance and financial situation. Most of the ratios are able to be calculated through the use of financial statements provided by the firm itself. They show the relationship between two or more financial variables that can be used to analyze trends and to compare the firm’s
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charges’ – the cost of capital in a company, in a division, in a branch store, or in a product. EVA focuses on managerial effectiveness in a given year (Brigham and Ehrhardt 2002). Therefore, EVA basic formula is calculated using NOPAT to reflect firm’s return from its operations: EVA = NOPAT – After-tax dollar cost of capital used to support operations = NOPAT – (Total net operating capital x WACC) Where, NOPAT = Net Operating Profit After Taxes WACC = Weighted Average Cost of Capital Total
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r = d. Without leverage, r =, with leverage, r = 14-5. a. | ABC | XYZ | FCF | Debt Payments | Equity Dividends | Debt Payments | Equity Dividends | $800 | 0 | 800 | 500 | 300 | $1,000 | 0 | 1000 | 500 | 500 | b. Unlevered Equity = Debt + Levered Equity. Buy 10% of XYZ debt and 10% of XYZ Equity, get 50 + (30, 50) = (80,100) c. Levered Equity = Unlevered Equity + Borrowing. Borrow $500, buy 10% of ABC, receive (80,100) – 50 = (30, 50) 14-6. a. V(Alpha) = 1022
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technical the capital asset pricing model relevant to ACCA Qualification Paper F9 the cost of equity Section F of the Study Guide for Paper F9 contains several references to the Capital Asset Pricing Model (CAPM). This article introduces the CAPM and its components, shows how it can be used to estimate the cost of equity, and introduces the asset beta formula. Two further articles will look at applying the CAPM in calculating a project-specific discount rate, and will review the theory, and
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Sales, C = Operating Costs, D = Depreciation, Tc = Corporate Tax Rate - EBIT = S – C – D - Taxes = EBIT x Tc = S – C – D x Tc - OCF = EBIT + D – Taxes = (S – C – D) + D – (S – C – D) x Tc - Project Net Income = EBIT – Taxes = (S – C – D) – (S – C – D) x Tc = (S – C – D) x (1 – Tc) - Bottom Up Approach = OCF = (S – C – D) + D – (S – C – D) x Tc = (S – C – D) x (1 – Tc) + D - Top Down Approach = OCF = (S – C – D) + D – (S – C – D) x Tc = (S –C) – (S – C – D) x Tc = Sales – Costs – Taxes - Tax-Shield
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Preface Let me begin this preface with a confession of a few of my own biases. First, I believe that theory and the models that flow from it should provide the tools to understand, analyze, and solve problems. The test of a model or theory then should not be based on its elegance but on its usefulness in problem solving. Second, there is little in corporate financial theory that is new and revolutionary. The core principles of corporate finance are common sense and have changed little over
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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Bachelor of Technology in Mining Engineering By SUDIP DAS Roll: 10605038 DEPARTMENT OF MINING ENGINEERING NATIONAL INSTITUTE OF TECHNOLOGY, ROURKELA 2010 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Bachelor of Technology in Mining Engineering
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ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Bachelor of Technology in Mining Engineering By SUDIP DAS Roll: 10605038 DEPARTMENT OF MINING ENGINEERING NATIONAL INSTITUTE OF TECHNOLOGY, ROURKELA 2010 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Bachelor of Technology in Mining Engineering By SUDIP
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examples, how the transactions impact the accounting equation. The accounting equation consists of three company`s accounts including assets, liabilities and owner`s equity. The accounting equation can be summarized as : Assets = Liabilities + Owner`s Equity Based on the equation, assets are the total of liabilities and owner`s equity. Assets are a company’s resources—things the company owns. Examples of assets include cash, accounts receivable, inventory, prepaid insurance, investments, land,
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