use WACC as a tool to value a project. If the project is below WACC, it will not generate enough return for the Investor. 3. How does Beta influence the WACC? Beta represents the measure of risk of the company. When using the capital asset pricing model, the beta coefficient is an index of risk. When the risk increases, the investor will expect a higher rate of return. So when the beta increases, it will cause the WACC to increase as well. 4. How does the Risk Free Rate influence the WACC
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specific assets which allow establishing competitive advantage in this market. Before considering pricing, you must set an appropriate valuation model. Wrong pricing can lead to the failure of Quasar in its purpose. The development of effective techniques in the prices for your notebook can maximize margins and earnings of the company. Both, the development of strategies and the appropriate pricing, require that they are directed to the objective and mission of the company. The recommendation to
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Journal of Revenue and Pricing Management Volume 2 Number 3 FUTURE OF REVENUE MANAGEMENT The future of pricing in services Stowe Shoemaker Received (in revised form): 2nd July, 2003 William F. Harrah College of Hotel Administration, University of Nevada, Las Vegas, 4505 Maryland Parkway, Mail Drop 6037, Las Vegas, NV 89154-6037, USA Tel: +1 702 895 1794; Fax: +1 702 895 1135; E-mail: stowe1202@aol.com Stowe Shoemaker is an associate professor at the William F. Harrah College of Hotel Administration
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* Capital Gains Yield equals ‘g’ * The Expected HPR then is: * Growth Rate: g= ROE * b * b= plowback ratio= (1- payout ratio) * payout ratio = div/EPS * ROE = Net Income/Shareholder’s Equity * The capital asset pricing model (CAPM) defines the relationship between risk and return E(RA) = Rf + A(E(RM) – Rf) * Risk-free rate Analysts and Corporations typically use current market yields on long-term bonds * The expected risk premium of an asset depends on the
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interest payment on the debt, or the required profit that the owners want in return for their investment (in MBA bullshit language: “expected return”). The expected return or COST OF EQUITY is determined by another financial model, the CAPM or the CAPITAL ASSET PRICING MODEL. Go to MBAbullshit.com or click here to learn more about it (get my eBook or watch our FREE video). When you COMBINE BOTH the interest rate of debt AND the ‘expected return’ of the investors/owners, we get the total cost of capital
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low-calorie, microwaveable food company could follow when selecting pricing strategies for making their products as inelastic as possible. Provide a rationale for your response. After researching, Mark Laceky Has a good plan that managers can follow in anticipation of raising prices when selecting pricing strategies for making their products respond to a change in price less elastic. He has six (6) price planning strategies: 1-Plan Pricing from Two Starting Points The two points he considers are supply
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with interactive features for those potential clients who are interested in the latest gadgets (Katzmaier, 2011). The consistency in high performance and stylish designs for their products ensures the brand recognition of Samsung TVs. 5.2. Price Pricing strategies are dependent on a variety of influencing factors. Despite popular belief, the lowest prices are not the most attractive to all customers, as the demands of the market in general has become more sophisticated and consumers have become aware
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Case 2: Harris Seafood Finance 380: Cases in Financial Decision Making Bojan Balaban, Tijo Jose, Nathan Liu NPV CALCULATIONS Charlie Harris is debating whether or not he should make an investment in the shrimp processing plant. We have concluded that he should make the investment in the processing plant if net present value (NPV) is positive. The NPV is calculated as: NPV= PV(benefits) – PV(cost) The goal here is to create value. Mr. Harris should only invest if the NPV is positive
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Chapter 7—Risk, Return, and the Capital Asset Pricing Model MULTIPLE CHOICE 1. Suppose Sarah can borrow and lend at the risk free-rate of 3%. Which of the following four risky portfolios should she hold in combination with a position in the risk-free asset? a. portfolio with a standard deviation of 15% and an expected return of 12% b. portfolio with a standard deviation of 19% and an expected return of 15% c. portfolio with a standard deviation of 25% and an expected return of 18% d. portfolio
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Marketing Mix Marketing: the process of conceiving ideas, products and services which are attractive to customers. Goal is to avoid pure competition Target market: group of likely consumers for product and service. Attract them with good marketing mix Marketing mix: shaping the combination of the product and approach to maximize customer value Predict tastes and preferences Attempt to understand human behavior- perception shape behavior, learned behavior over time creates expectations
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