Petrochemicals ......................................................................................................... 5 3) EMRP ................................................................................................................. 6 III. WACC &
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Valoración de Empresas IIND-3402 ------------------------------------------------- JULIO VILLARREAL NAVARRO 2015-10 ------------------------------------------------- ASIST. GRADUADO: RAÚL A. ESCOBAR Nombre | Código | Grupo | Andrés González Pungo | 201124899 | 11 | Luis Camilo Díaz | 201124802 | | Jaime Alberto Ronderos | 201124231 | | Juan Fernando Salazar | 201126734 | | ------------------------------------------------- Abstract:
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Case 15 Teletech Corporation I. Summary: The Teletech Corporation is a U.S company that provides integrated information movement and management. It has two main business divisions, which are The Telecommunication Services, and The Products and Systems. In Telecommunication Services division, it primarily provided many kinds of phone service to business and residential customers. In fact, it performed a network for 7 million customer lines throughout Southwest and Midwest. The division archived an
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Question #1. Estimate the individual WACCs for each of Teletech’s Segments. As you do so, carefully indicate any assumption in your calculations. By treating the two segments as a separate business this is what we discovered: CAPM - Telecommunications Services Rf = 4.235 Beta = 1.02 Rm-Rf = (9.5%-4.23%) = 3.77% Cost of equity = 4.23% +1.02(9.5-4.23%) = 9.6% WACC = (25% )(3.44%) + (75% )(9.6%) WACC = .0086 + .072 = 8.1% CAPM – Products and Systems Rf = 4.39% Beta = 1.4 Rm- Rf =
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cost of capital would result in an over-estimate of the NPV. Both over-estimate and under-estimate would affect the company to make the best decision of the project. Midland’s firm-wide, E&P, and R&M WACC Retrieved from excel, above are Midland’s firm-wide, E&P, and R&M WACC. The method and choices of inputs will be explained as follows, also excel sheet attached. For cost of debt, the formula used is Rd = Rf + Spread to Treasury. Assume that Midland will continue heavy investment
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addresses the valuation of firms by cash flow discounting. The first part shows that the four most commonly used discounted cash flow valuation methods (free cash flow discounted at the WACC; cash flow for equityholders discounted at the required return on the equity flows; capital cash flow discounted at the WACC before taxes; and Adjusted Present Value) always give the same value. The disagreements in the various theories on the valuation of the firm arise from the calculation of the discounted
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Chapter 9 Mini Case During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Harry Davis’s cost of capital. Jones has provided you with the following
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$F Pn F% or $F= flotation cost per share re typically higher than rs because of flotation costs. Weighted Average Cost of Capital (WACC) = wdrd(1 - T) + wprp + wc(rs or re) calculate WACC with retained earnings calculate WACC with new common stock Capital structure weights (wd, wp, wc) based on book values. The weight is the dollar amount of the capital type divided by total assets. The sum of the weights must equal 100%
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which is the market risk that affects the larger number of assets. Unsystematic risk of a portfolio can be brought down to zero through diversification whereas systematic risk cannot be diversified. This can be further elaborated with the help of an example. A sudden rise in inflation affects all the companies by lowering the real return of all investments thus creating systematic risk whereas an oil strike by a company affects the specific company or few other companies bur does not affect the world
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financial accounting, performance assessments, M&A proposals, and stock repurchase decisions. They were performed at division of business unit level as well as corporate level. In addition, the estimated cost of capital is an essential component in WACC and discounted cash flow calculations that can help Midland evaluate the expected growth and prospective investments. A too high estimate of Midland’s cost of capital causes a lower NPV because of the higher discount rate. As a result, Midland decision
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