(TCO G) Which of the following statements is CORRECT? (Points : 10) 3. (TCO G) LeCompte Corp. has $312,900 of assets, and it uses only common equity capital (zero debt). Its sales for the last year were $620,000, and its net income after taxes was $24,655. Stockholders recently voted in a new management team that has promised to lower costs and get the return on equity up to 15%. What profit margin would LeCompte need in order to achieve the 15% ROE, holding everything else constant? (Points
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until 2020 will use the revenue growth as a measurement to calculate the NWC for the next years. The revenue growth is 9 percent per year so the NWC will grow by 9 percent per year. FCF = (Revenue – Costs – Depreciation) x (1 – tax rate) + Depreciation – Capital Expenditure – change in working capital. So when I fill in this formula I get: 71,1 – 69,1 – 2,2 x (1 – 0,35) + 2,2 – 2,26 - -43,24 = 45,79. See for the next years the last page of this document. 1b) that is because most of the football clubs
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copy available at: http://ssrn.com/abstract=1764024 The WACC Fallacy: The Real Effects of Using a Unique Discount Rate Abstract We document investment distortions induced by the use of a single discount rate within firms. According to textbook capital budgeting, firms should value any project using a discount rate determined by the risk characteristics of the project. If they use a unique company-wide discount rate, they overinvest (resp. underinvest) in divisions with a market beta higher (resp
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| FIN-516 Week 2 - MINI – CASE ASSIGNMENT | Deere & Company (NYSE:DE) | | A fundamental Analysis into the financial performance of Deer and Company (NYSE :DE ), better known as JOHN DEERE & CO. | FIN-516 – WEEK 2 – MINI – CASE ASSIGNMENT Deere & Company (NYSE:DE) 1. What is the name of the company? What is the industry sector? Deere & Company also more commonly known as John Deere, along with its subsidiaries, operates in three segments: agriculture and
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1. What is an appropriate required rate of return against which to evaluate the prospective IRRs from the Boeing 777? 1a. which beta did you use? Why? 1b. if you used the CAPM, which risk premium and risk free rate did you use? Why? 1c. which capital-structure weights did you use? Why? Answer: i. Key Assumptions for the Calculation: In order to calculate the appropriate rate of return against which to evaluate the prospective cash flows from the Boeing 777 project, several assumptions had
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different risks. Once you have the project you can use the CAPM equation to calculate the cost of equity rE as: rE = rf + *(rm - rf) where rf – risk free rate and (rm - rf) – risk premium Once cost of equity is calculated, weighted average cost of capital can be calculated as below: WACC = (1-T)*(D/D+E)*rD + rE * (D/D+E) where T – tax rate, D – market value of debt, E – market value of equity and rD – cost of debt The biggest concern for Dan is to calculate the appropriate beta and thus discount
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Report on Capital Structure and the Cost of Capital of AstraZeneca Plc and British American Tobacco Plc. Table of Contents 1.0 Introduction………………………………………… 4 2.0 Background………………………………………… 5 3.0 Capital Structure…………………………………… 6 3.1 Debt to equity……………………………… 6 3.2 Long term debt to equity…………………... 7 3.3 Total debt to capital………………………… 7 3.4 Long term debt to capital…………………... 8 3.5 Balance sheet structure AZN………………
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Introduction and industry analysis JetBlue Airway Corporation is an American low-cost airline and it was one of a few U.S. airlines that were profitable during the sharp downturn in airline industry affected by the September 11, 2011 attacks. With its strong capital base, the company was successful due to its impressive management team, in which, David Neelaman has rich experience with airline start-ups; COO David Barger and CFO John Ower are all experienced former senior managers from other airlines
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This however should not be a concern to the management, as favourable terms with suppliers and customer means that the business can meet its current liabilities. The analysis of peers suggests that it is industry standard to have a negative working capital. The analysis of Molton Brown shows that it is a profitable business which achieved an impressive 18% increase in turnover vs prior year. A high current ratio may indicate that Molton Brown is not using its financial resources very effectively and
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Rogers Capital Structure When firm’s have a mixture of debt and equity it is called Capital Structure. A firm’s capital structure decision includes its choice of a target capital structure, the average maturity of its debt, and the specific types of financing it decides to use at any particular time. The value of a firm’s operations is the present value of its expected future free cash flow (FCF) discounted at its weighted average cost of capital (WACC). The WACC depends on
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