[pic] Midland Energy Resources, Inc. Cost of Capital Table of Contents I. Executive Summary II. Introduction III. Cost of Capital IV. Risk & Tax Rate V. Capital Structures VI. WACC VII. Conclusion VIII. References I. Executive Summary Midland Energy Resources is a global energy company with operations in oil and gas exploration and production(E&P) providing a broad array of products and services to upstream oil and gas customers worldwide
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PROBLEM SET 4 1. Consider Macbeth Spot Removers, a publically traded company with an infinite life span, which faces a range of annual operating incomes as depicted in the table below. The rate of return on Treasury bonds is 10%. |Data | |Number of shares |700 | | |
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assets-in-place and their associated growth opportunities. THE CORPORATE VALUATION MODEL (Section 13.2) You are given the current and projected financial statements of MagnaVision. Growth is expected to be 5% for each year after the projections. If the WACC is 10.84%, what is the value of operations? INPUT DATA SECTION: Current and Projected Data Used in the Analysis Table 13-1. MagnaVision, Inc.: Income Statements for Years Ending December 31 (in millions of dollars) Actual Projected 2010 2011 2012 2013
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Case Study 15-10 a. As a general rule, the impact of capital structure on value depends upon the effect of debt on weighted Average cost of capital (WACC) and Free Cash Flow (FCF). Debt owners have priority on cash flows over stockholder as their fixed claim amplifies risk of stockholder residual claim (Capital Structure Decisions 2010). As such cost of stock (rs) increases. A company can subtract interest expenses which reduce the amount of taxes paid and in turn allows greater cash flow for
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regulatory or currency risk was not feasible. Based on the facts of 15 sample projects in different countries in the world, in order to calculate the range of discount rates around the world, we should find the highest and lowest WACC in 15 samples, which should be the WACC of USA and WACC of Argentina, because USA has the highest credit rating and Argentina has the lowest credit rating in 15 sample projects. First, we identified unlevered beta for USA and Argentina from Exhibit 7b are 0.25 for USA because
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cost of capital (WACC). Table 3 of the appendix shows the different weights for each category. Taking into account the relevant information about the cost of each category, it is easy to multiply them with the weights. Summing up all three pre-tax values, one ends up with a pre-tax WACC of 12,54 percent. Given the information that the marginal tax rate for Virginia May is 40 percent, notes payable and the long term debt must be taxed. Therefore, one ends up with an after-tax WACC equal to 10,0975
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2. In this case Marriott used Weighted Average Cost of Capital to determine to take on certain investments. Using the WACC it does make sense in this instance. Marriott has 3 different divisions they are in: lodging, restaurants, and contract services. For each of these services they calculated each WACC individually to give an accurate account of each individual divisions risk level. They use hurdle rates for each division to see which projects to take on and if they provide enough return for
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The Cost of Capital for Goff Computer, Inc. BUS650: Managerial Finance (MAH1209A) Dr Charles Smith March 18, 2012. The Cost of Capital for Goff Computer, Inc.: 1. Most publicly traded corporations are required to submit 10Q (quarterly) and 10K (annual) reports to the SEC detailing their financial operations over the previous quarter or year, respectively. These corporate fillings are available on the SEC Web site at www.sec.gov. Go to the SEC Web site, follow the “Search for Company Filings”
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rmResponse 1/7 1/9/2015 Procter & Gamble: Cost of Capital CORPSTRAT should directly report the findings as it is always good to have multiple estimates through different (wellsubstantiated) assumptions for cost of capital While estimating WACC for her client, Does looking at companies other than P&G make sense for Ms. Shiller?? Why? * Cost of capital is a market value concept in which there is an effect of other firms in the industry, whereas heavily theoretical formulae like CAPM use book values
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9-295-100 Rev. August 7, 1997 Cross-Border Valuation Cross-border investment has assumed a prominent place among the key decisions facing investors and corporate managers. In today’s increasingly global marketplace, many investment projects, corporate acquisitions and mergers have important international components. The importance of cross-border valuation methods have been underscored by trends toward the relaxation of capital controls, European economic integration, and, since the early
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