of the company, we have calculated the weighted average cost of capital (WACC) for the purpose of bringing future cash flows in present terms. For the calculation of WACC, we have assumed the A credit ratings for the Flinder Valves. On the other hand, we have assumed the 30-years US Treasury yields as a risk free rate of return and geometric average rerun as market premium for the calculation of cost of equity. Through WACC, we have calculated the NPV of the future cash flows of the pre-merger estimates
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understated, Midland may engage in an investment that is potentially “bad” and will be overvalued. Shareholders will see over inflated returns based on this approach. 2. Based on our calculations, our team has determined that Midland’s firm-wide WACC is 8.48%. Assumptions that our team made can be found starting on cell F25 on the Exhibit 5 tab. The EMRP(5%) was taken out of the context of the case study, the risk-free rate(4.98%) derives from the 30 year treasury yield from Table 1 which is
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Earnings per share? e. Debt interest coverage ratios and financial flexibility? f. Voting control by the Wrigley family? 3. What is Wrigley’s current (pre-re-capitalization) weighted-average cost of capital (WACC)? 4. What would you expect to happen to Wrigley’s WACC if it issued $3 billion in debt and used the proceeds to pay a dividend or to repurchase shares? 5. Should Blanka Dobrynin try to convince Wrigley’s directors to undertake the recapitalization? Management Summary
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cost of capital to accurately estimate what rate their cash flows should be discounted back at. Joanna Cohen’s WACC Calculations Cohen decides to use a single cost of capital rather than multiple costs of capital. This is accurate as Nike operates primarily in the same business segments and each segment assumes similar risks. To find Nike’s Weighted Average Cost of Capital (WACC), she must first find the capital structure of the firm. Cohen incorrectly uses the book value of equity, rather than
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Financial Management Assignment | Case Study and Question Analysis | Amandeep Singh Kabli F-084 Section - B | Case: 1 Arnold Athletic Supplies Answer: Required Rate of return > =WACC Equity* cost of equity + debt*Interest (1-tax) WACC= -------------------------------------------------------------------------- Debt + equity Equity = Market value of the equity = No. of shares* market Value of the share
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cost of capital were used in many analyses within Midland, including asset appraisal for both capital budgeting and financial accounting, performance assessments, M&A proposal, and stock repurchase decisions. No, they were using the formula for WACC to estimate the cost of capital. 2. Assume the business is on-going for a long period of time. We use 4.98%, which is the 30-year yield to maturity for U.S. Treasury bonds in January 2007 in Table 2, as the risk-free rate. Assume the Spread to Treasury
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TO: Harry Barry, CFO, New Earth Mining Inc. FROM: Jiashu Zheng - 2037 0233, Kenneth Shum - 2037 5516, Donny Kim - 2036 9046, Yiwei Du - 2039 2845, Liane Pereira - 2038 4155, Lin Gan - 2038 3499, Group 4 Financial Analysts, New Earth Mining Inc. DATE: October 7, 2013 RE: Project Valuation of New Earth South Africa (NESA) 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
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The Rationale e. The Valuation f. The Financing III. The Risks……………………………………………………….…p. 5 IV. The Financial Crisis……………………………………….……...p. 5-7 g. The Macroeconomy and Industry h. The Firms i. The Post-Crisis WACC j. The Post-Crisis Valuation k. The Post-Crisis Financing V. The Recommendations……………………………………………p. 7-8 l. The Options m. The Recommendations VI. The Results………………………………………………………..p. 8-9 VII. Exhibits………………………………………………………
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cash flow: 25 4.3 Weighted Average Cost of Capital (WACC) 25 4.3.1 Value of Debt and cost of debt: 25 4.3.2 Value of equity and cost of equity: 26 4.3.3 Weighted Average Cost of Capital (WACC): 27 4.4 Value of Harvey Norman Holding Ltd and estimated share price: 28 4.5 Sensitivity Analysis: 28 4.5.1 Operating revenue and share price: 29 4.5.2 Share price as a function of terminal FCF growth and WACC: 30 4.6 Share price assessment and investment decision:
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Продолжающееся преобразование Асахи Глас (Asahi Glass): применение EVA Тошия Ивасаки, основавший нашу компанию в 1907 году, после множества неудач удалось преуспеть в организации первого в Японии производства плоского стекла. Он говорил: “Никогда не следуйте по самому простому пути, боритесь с трудностями.” Он построил корпоративную культуру таким образом, чтобы иметь возможность решать самый трудные проблемы. Шиня Ишицу, Президент и генеральный директор (CEO)
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