A Tutorial on Discounted Cash Flow, Fall 2015 Notes prepared by John Tsagarelis, jtsagare@uwo.ca DRAFT: Comments, Suggestions Welcome 9/20/2015 Preamble As we walk through life we develop mental maps of situational settings. These are not sight patterns, but rather decision patterns among choices available to us in any given circumstance. For example, we take familiar roads to our summer cottage or accept return-on-equity is an unbiased stock return predictor. Once we form a map, it is
Words: 3461 - Pages: 14
Marriott's corporation: the cost of capital What is the weighted average cost of capital for Marriott Corporation? Are the four components of Marriott's financial strategy consistent with its growth objective? Marriott Corporation is an international company who's the growth over the year has been more than satisfactory. In 1987, Marriott's sales grew up by 24% and its return on equity stood at 22%. Moreover the sales and earnings pr share has doubled over the previous year. The company
Words: 811 - Pages: 4
5. The target capital structure is 30% long-term debt, 10% preferred stock, and 60% common equity. Procedure 1. What sources of capital should be included when you estimate XYZ's WACC? The WACC is used primarily for making long-term capital investment decisions, I.E., for capital budgeting. Thus, the WACC should include the types of capital used to pay for long-term assets, and this is typically long-term debt, preferred stock (if used), and common stock. Short-term sources of capital consist
Words: 776 - Pages: 4
must prepare financial forecasts, calculate the weighted average cost of capital (WACC), estimate cash flows, and evaluate financing alternatives. This case is especially recommended as a final exam case for a standard MBA-level course in corporate finance. Subjects Include: Capital Budgeting, Cash Flows, Financial Forecasting, Long Term Financing, Net Present Value (NPV), and Weighted Average Cost of Capital (WACC) For the Flash Memory Inc. case you will turn in both a write-up of your analysis
Words: 780 - Pages: 4
the cost of capital of the CNX Nifty 50 Stock Index. It explores the possibility of establishing a new benchmark, the cost of capital of stock index, in the context of capital markets. The weighted average cost of capital (WaCC) of the Nifty 50 Stock Index is computed. The WaCC computed can form a new benchmark against which companies can compare their own cost of capital. Usually, companies raise a combination of debt and equity to finance their business. A new company can use this benchmark as
Words: 6011 - Pages: 25
Question 1 | | 0.25 / 0.25 points | APV = NPV (without expansion option) + Value of the expansion option. | | 1) True | | | 2) False | Question 2 | | 0.25 / 0.25 points | The owner of a professional sports franchise, looking to get a new stadium, would benefit from a put option if the deal falls through. | | 1) True | | | 2) False | Question 3 | | 0.25 / 0.25 points | If you write a put option, you acquire the right to buy stock at a fixed strike price. | | 1) True |
Words: 5580 - Pages: 23
The company I pick from S&P 500 is Google Inc., which is a multinational corporation specializing in internet-related service and products. Google has been estimated to be a rapidly growing global technology leader focused on improving the way people connect with information, and its trading stock price is remained really high and still on the rise. The expected sales are given by Capital IQ from year 2014 to year 2018, and their values are listed below in the table. By calculating the average
Words: 1317 - Pages: 6
* Contents 1. Executive Summary 3 2. Analysis Model 3 3. Company Overview 3 4. Industry Outlook 3 5. Company Evaluation 4 Free Cash Flow Estimation 4 Cost of Equity, Cost of Debt, WACC Calculation 5 Discounted Cash Flows and Company Evaluation 5 6. Sensitivity Analysis 6 7. Final Recommendations 6 8. Appendix 7 Appendix 1: Historical Free Cash Flow Analysis 7 Appendix 2: Historical Free Cash Flow Analysis 8 Appendix 3: Growth Estimations 9 Appendix 4: 2012 Operating
Words: 3580 - Pages: 15
Asahi Glass (As of 2002) 1) Situation/ Background Asahi Glass Company (AGC) is a Japan-based multinational manufacturer of flat glass, chemicals, and electronics and displays, with annual sales of 1.3 trillion Yen and the largest global market share in most of its product categories. AGC controlled a network of over 200 subsidiaries and affiliates in 25 countries. Mr. Ishizu, the president and CEO were trying to change the company’s structure and corporate culture in order to create a truly
Words: 566 - Pages: 3
anxiety should lead the way of Pan-Europa. ___________________________________________________________________________ Question 2: There are three NPV – NPV at Corp WACC (10,5%), NPV at minimum ROR and equivalent annuity. Ranking all projects against each of this category provides slightly different results. However, I used NPV at Corp WACC (10,5%) as this includes the most recent estimated weighted-average cost of capital for Pan-Europa. The results are in the table below: Rank 1 2 3 4 5 6 7 8 9 10
Words: 382 - Pages: 2
