of debt .................................................................................... 2 (c) Preference and explanaton between arithmetic & geometric mean to measure rates of return . 2 3. Which type of investment you value using Marriott’s WACC. What would happen to Marriott over time if company used a single hurdle rate ........................................................................................... 3 4. The cost of capital for the lodging and restaurant divisions of Marriott
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1.1 Shareholder analysis Group Limited (TGR) is the leader of producing Atlantic salmon in Australia. TGR was founded in 1986 and become public company listed on the ASX in 2003(Tassal 2014). In 2012, TGR formed partnership with the World Wide Fund and Nature Australia (WWF). TGR’s efforts in food safety, social welfare, animal welfare and, environmental and traceability aspects of the operations has earned itself the first company to achieve Best Aquaculture Practices (BAP) certification at
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that consist within their cost of capital, the Weighted Average Cost of Capital (WACC), and marginal cost of capital schedule. The reason for doing so is to provide Mr. Naranjo, CFO of Ace Repair, on different ways Ace repair may be able to come up with different weight estimations, in terms of capital structure. Also, our team has been assigned to determine the significance these weights hold, in terms of the WACC. The first task to be completed was to determine which components made up the
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payable and accruals are sources of funding to be considered in the calculation of the WACC. This view is not correct because what is not provided by investors is not capital. Current liabilities arise on account of an operating relationship of the firm with its suppliers and employees. They are deducted when the investment requirement of the project is determined. Hence they should not be considered in calculating the WACC. Of course, current
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4-year life is $500,000. Webmasters’ federal-plus-state tax rate is 40%. Its cost of capital is 10% for average-risk projects, defined as projects with a coefficient of variation of NPV between 0.8 and 1.2. Low-risk projects are evaluated with a WACC of 8%, and high-risk projects at 13%. a. Develop a spreadsheet model, and use it to find the project’s NPV, IRR, and payback. Key Output: NPV = Part 1. Input Data (in thousands of dollars) IRR =
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The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. Nike finances its assets either through debt or with equity. WACC is the average of the costs of these types of financing, each of which is weighted by its proportionate use. By taking a weighted average in this way, we can determine how much interest a company owes for each dollar it finances. A firm's WACC is the overall required return for a firm
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EVA = Economic value added EVA=NOPAT- WACC * invested capital (=D+E) - NOPAT= net operating profit after taxes (essentially fancy word for CF) substract from that WACC -> WAS there anything left after substracting it EVA More economic concept: NPV approach BUT: (period by period NPV – disadvantage) DANGERS FOR EVA: - Every specific project needed it own WACC * lower WACC – higher EVA – performance realtive to EVA WACC – same to everything -> tendency to take more
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be set which they use to discount a project’s cash flow to see if it will be profitable enough. We will conduct an analysis to calculate the hurdle rate for Marriott as a whole and for each division. We will use WACC as the hurdle rate. The results of our analysis show that Marriott’s WACC as a whole is 11,61 %. For lodging, 10,04% and for restaurants 13,03%. These should be the hurdle rates to use when valuating projects. The reason that these values differ is the difference in risk premiums and
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debt/value of 20.9% and tried to find where in the table it fit the best. It would fall somewhere in the middle of the second to last and the last entry in the WACC table. This leaves us with a value in the middle of 9.38% and 9.31%. The 20.9% falls closer to the debt/value associated with the WACC of 9.38% so we decided to use the WACC of 9.38%. We also felt like using the higher of the two discount rates would give us a more modest and safe NPV. The first flaw is that Dowling says the 7.75%
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evaluate the 777 against a financial standard. The case gives internal rates of return (IRRs) for the 777 project base case and alternative forecasts. The principal analytical problem of the case is an estimation of a weighted average cost of capital (WACC) for Boeing’s commercial aircraft division in order to evaluate these IRRs. The analysis should also identify ‘key value drivers’ and distinguish, on a qualitative basis, the key gambles Boeing is making. Capital budgeting projects should promote
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