Question 3 Explain why the total risk of a portfolio is not simply equal to the weighted average of the risks of securities in the portfolio. On this I will explain with an example you have two groups of stock that 40% is firm A and 60% is B both have different return to a complete total of 100% in a relation to wish one is 60 % or 40 %, it will carry a weight and the combination of both and the average of risk that is in the two different firm create a risk to that portfolio just
Words: 545 - Pages: 3
Midland’s capital planning model basically depends on the macro financial market and strategy of the overall company in 2007, which includes stimulating the overseas growth, investing in valuable projects, optimizing its capital structure and to repurchase undervalued shares. It firstly allows Midland to figure out the reasonable amount of financing, range of capital structure, and WACC for the whole company basing on the required interest rate of market. Then, Midland could use its capital planning
Words: 1572 - Pages: 7
3 Individual Project/DB Capital Budgeting Janella Chapman ACCT-614/Applied Managerial Accounting March 15, 2013 Professor Tracie Edmond I. Overview As companies look to grow and expand operations, product lines, or locations, capital budgeting is the method used by management in evaluating if projects and long-term investments will be profitable for the company. Capital budgeting analysis evaluates projects that will have cash flows for longer than a year. Capital budgeting helps management
Words: 1154 - Pages: 5
following questions: 1. What does it mean when people refer to a firm’s “cost of capital?” 2. What are the three components that normally make up a firm’s weighted average cost of capital (WACC)? 3. (calculating the after-tax cost of debt) Suppose your firm can borrow what it needs from a local bank at 4.5% interest. If your firm’s effective tax rate is 40%, what is its after-tax cost of debt? 4. (calculating the cost of preferred stock) Suppose your firm wants to finance a project, in part
Words: 414 - Pages: 2
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”
Words: 1887 - Pages: 8
Midland Energy Resource Case Analysis I. Midland’s capital planning model and Janet Mortensen's role. The capital-planning model adopted by Midland is MACC, standing for weighted average cost of capital. The primary role of Janet Mortensen is frequently calculating corporate and divisional costs of capital at division level as well as corporate level. In addition, she also needs to check the appropriateness of her calculation and append “user`s guide” to it. Evaluating M&A proposals, stock
Words: 709 - Pages: 3
Petroleum was formed in 1924; they refine oil, pipeline transportation, and industrial fields. PPC has is one of the primary producers of Alaska crude and in 1990s provided 60% of Pioneer’s domestic petroleum liquids production. PPC are also the lowest cost refiners on the West Coast. It is merged with several other independent firms in their industry. After the merge they integrated vertically into exploration and production of crude oil and marketing refined petroleum products, but horizontally into
Words: 1039 - Pages: 5
Google WACC Project Click Link Below To Buy: http://hwcampus.com/shop/bus-5440-google-wacc-project/ Google WACC Project In this project, you will find and discern the appropriate data to determine a realistic assessment of the weighted average cost of capital for Google. You will need to search for data from several sources, use subjective judgment to determine which data to use or discard, use subjective judgment to determine which calculation gives a more acceptable estimate and make
Words: 447 - Pages: 2
use to calculate the cost of equity? The risk free rate used was a weighted average of the short-term treasury bills and long-term bond rates found in Exhibit 4. Using a weighted average based off the amount of revenue for each of the three divisions, long-term bond rate of 4.58% was used for the lodging, while the short-term Treasury bill rate of 3.54% was used for the contract services and restaurants. For the risk premium, a similar approach was used, using a weighted average from the spread rates
Words: 401 - Pages: 2
NIKE, INC.: COST OF CAPITAL The cost of capital represents the minimum return required by providers of finance for investing in an asset, it may be a project, a business or strategic unit or an entire company. It needs to represent the capital structure used to finance the investment and therefore likely to include cost of equity and debt. The cost of capital also represents a “hurdle rate” that a company’s projects must exceed in order to increase shareholders wealth and is used as a
Words: 265 - Pages: 2
