overview of: our financial condition, the iron ore market, major risks associated with this project, estimated project NPV, and the benefits of the financing packages. From our analysis, the NPV of this project is $137.36M - $104.31M. While there is risk associated with venturing into an unfamiliar market in a politically volatile country, the debt financing packages mitigate this risk. Thus, we believe that the project should be accepted. FINANCIAL CONDITION We experienced growth in earnings from
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The Debt-Equity Trade Off: The Capital Structure Decision Aswath Damodaran Stern School of Business Aswath Damodaran 1 First Principles n Invest in projects that yield a return greater than the minimum acceptable hurdle rate. • The hurdle rate should be higher for riskier projects and reflect the financing mix used - owners’ funds (equity) or borrowed money (debt) • Returns on projects should be measured based on cash flows generated and the timing of these cash flows; they should
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Analysis to Making Financing Decisions in Practice: Two Case Examples in Australia George W. Kester, Washington and Lee University Jamie Mckellar, Thiess Pty Ltd Jeremiah Mulcahy, BHP Billiton Ltd This paper describes the use of the FRICTO analytical framework for comparing financing alternatives and making financing decisions. Two case examples in Australia are presented to illustrate how two former investment bankers have used the FRICTO framework to help clients make financing decisions that take
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$100 Debt $10 Equity $90 Question 3a. What is the firm’s weighted cost of capital at various combinations of debt and equity, given the following information? Debts/Assets After Tax Debt Cost Cost of Equity Cost of Capital (weight)(cost of debt) weight (cost of equity) = k (cost of capital) 0% 8% 12% 10 8 12% 20 8 12% 30 8 13% 40 9 14% 50 10 15% 60 12 16% Answer – Debts/Assets After Tax Debt Cost Cost of Equity Cost of Capital (weight)(cost of debt) weight
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Business Financing and the Capital Structure Business Financing and the Capital Structure Shavonne Brewer Finance 100 March 10, 2014 Professor Andrew Maginnis If I were a financial advisor to a business what I would do is give an example how debt financing works
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Debt Versus Equity Financing Debt versus Equity Financing is an interesting subject in that it is one of the most important decisions a company will face when choosing to finance a new project. Debt Financing is a more traditional approach. In Debt Financing a company seeks financing from a financial institution or a private debt through a group of investors in the form of a loan. The loan will have set terms such as interest, repayment schedule, and payment amounts. The company will be obligated
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explain what is debt financing, and provide two examples. Also, one would need to explain what equity financing is as well as giving two examples and last which alternative capital structure is more advantageous and why. If one decided that they do not wanted to take on investors and wanted total control of the business yourself, one may want to pursue debt financing in order to start up a business. One would tap your own sources of funds first by using personal loans, home equity, and even credit
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the new product line. The financing requirements in 2010, 2011 and 2012 are $14,433, $17,120 and $13,228 respectively. This increase in debt levels has changed the capital structure of the firm over time, increasing debt as a percentage of capital from 28% in 2007 to as high as 39% by 2011 (vs. a target of 18%). We calculated WACC for both scenarios - funding by increasing notes payable or by the issuance of stock. For the notes funding, we assumed a 9.25% cost of debt (loan rate of 3.25% prime
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borrowing and equity financing that can minimize the overall cost of capital (the weighted average of its interest rate and dividend payments). By minimizing the cost of capital used to finance a given size and risk of operations, financial managers can maximize the value of the company and therefore maximize shareholder wealth. 25 26 MULTINATIONAL COST OF CAPITAL AND CAPITAL STRUCTURE BACKGROUND ON COST OF CAPITAL Apart from working capital, a firm’s capital consists of equity (retained earnings
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Raunaq Singh (08EM-034) Contents 1) Introduction 3 a) Nestle India 3 2) EPS Calculation 3 a) EPS Break-up 3 3) D/E Calculation 4 a) Debt and Equity Values 4 4) Interest Coverage Ratio 5 a) EBIT - Interest Values 5 5) Project Financing 6 a) EPS 6 b) D/E 7 c) Coverage Ratio 7 d) Equity- Debt 8 e) Equity- Preference Shares 8 6) Conclusion 10 Introduction Nestle India Nestle India is a subsidiary of Nestle S.A. of Switzerland. Nestle India manufactures
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