Βdyn_Lev = βu_ind x [1+ (1-T) x D/Edyn] = 0.25 x [ 1 + (1+0.29) x 0.82] = 0.39 Chapter 13 question 15 (pg 442) β = 1.3 E (Rm) = 14% Rf = 5% E(r) = Rf + β x [E(Rm)-Rf] – EMRP formula = 5 + 1.3 (14 - 5) 5 + 1.3 x9 16/7% Session 3 Cost of capital Question 3 pg 472 E (R) = Rf + βE(EMRP) = 4% + 1.15 x 8 = 13.2% Slide 6 applies Re = E1/Po + g = D0(1+g)/P0 +g = 1.8(1+0.05)/34 + 0.05 = 10.56% Rc_ave = 13.2+10.56/2 = 11.88% Question 6 pg 472 WACC (cost of funds the company
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FINANCIAL MANAGEMENT AND POLICIES FIRST YEAR REQUIRED COURSE PACKET Quarter III, Spring 2010 FACULTY Section I: Section II: Section III: SectionIV: Section V: FINANCIAL MANAGEMENT AND POLICIES Quarter III, Spring 2010 Elena Loutskina Marc Lipson Robert Conroy MarcLipson Elena Loutskina IMPORTANT SCHEDULE ANNOUNCEMENT: Thursday, February 19 is a DAY LONG exercise that requires your participation until 5:30pm that evening. By compressing the exercise into a single day we were able to designate
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Cost of Capital Introduction This paper examines key elements of a cost of capital policy to facilitate objective management and allocation of corporate funds. In order for a company to make long-term investments to grow, whether that is new equipment, new products or other assets, managers must be aware of the cost of acquiring any of these assets. The obvious objective for these managers is to earn more than the cost of capital and in doing so will increase their company’s market value. If
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Lecture 13: Capital Structure Theory Exercises Question 1 Levered Inc. and Unlevered Inc. are identical in every respect except for capital structure. Both companies expect to earn $150 million in perpetuity, and both distribute all of their earnings as dividends. Levered’s perpetual debt has a market value of $300 million and the required return on its debt is 7%. Levered’s stock sells for $100 per share, and there are 5 million shares outstanding. Unlevered has 8 million shares outstanding worth
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then). This case concerns financing large investments in capital assets in a short period of time for strategic reasons. According to Modigliani and Miller, with efficient markets and no corporate taxation, firms should be able to raise all funds necessary to finance positive net present value projects and, further, the firm’s capital structure (or off-balance financing structures) should not affect the firm’s weighted-average cost of capital (WACC) or the availability of credit. This case is particularly
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Faculty of Business and Economics Objective To develop an understanding of applied corporate finance including financial analysis and forecasting, financing sales growth, short-term versus long-term financing, capital structure policy, capital investment analysis, cost of capital, and company valuation. The course will be experiential and focus upon selected Harvard Business School cases describing actual business situations faced by financial managers, requiring analysis, and decision-making
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investment and financing, and their interrelatedness. The overall goal is to obtain a comprehensive and in-depth perspective of the area of Corporate Finance. Major topics include financial analysis and planning, valuation, capital budgeting, capital structure, dividend policy, working capital management, mergers and acquisition, hybrid financing, bankruptcy, multinational financial management, and risk management. Special emphasis is given on integration of the concepts of financial management into a total
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Impacts of Profitability and Financial Leverage on Firm’s Capital Structure By [Your Name] [Instructor’s Name] [Institution’s Name] [Date] Declaration While conducting the proposed research work, I, being a hard-working, innovative and conscientious researcher, come up with the factual severity of consequences allied with an act of plagiarising content from others’ work. Moreover, I do comprehend the rules and regulations my university encompasses against submitting a plagiarised
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Case Assignment: Calpine Corporation Restructuring This case illustrates how bargaining among bankruptcy stakeholders over enterprise value functions inside the confines of a Chapter 11 case. Calpine is a leading independent provider of energy that filed for Chapter 11 protection in December 2005. This case picks up in early November 2007, just prior to a November 15, 2007 deadline set by the bankruptcy judge for submission of expert reports on the enterprise valuation of the restructured Calpine
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INTRODUCTION This memo addresses the feasibility of the NESA project and provides a brief 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
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