the growth amount to the revenue. The projected revenue for 2002 is $10,153 million. Then she multiplied cost of goods sold percentage of sales, 60.0%, and the selling and administrative percentage of sales, 28.0%, by the projected revenue of 2002. After subtracting the two amounts from the projected net income, the projected operating income for 2002 is $1,218.4 million. The net working capital equation is current assets minus current liabilities. To calculate the projected current assets and current
Words: 1434 - Pages: 6
in research and development of new products to stay ahead of the competition. Increased working capital requirements force the CFO to consider alternatives for additional financing. In addition, he must also consider an investment opportunity in a new product line that has the potential to be extremely profitable. Students must prepare financial forecasts, calculate the weighted average cost of capital (WACC), estimate cash flows, and evaluate financing alternatives. This case is especially recommended
Words: 780 - Pages: 4
help having a better perspective of how are the performance management being a support for its evolution to incentive even more current and potential investors. Table of content Introduction 4 Cost of Equity 5 Market Beta 7 Cost of Debt 14 Weighted Average Cost of Capital (WACC) 17 Conclusion 18 References 19 Appendix 21 Introduction Due to the current economic status quo of business markets worldwide, many companies have lost their “feet”, in other worlds,
Words: 4435 - Pages: 18
Case Study II Weighted Average Cost of Capital Company chosen in the S&P 500 : Name HEINZ Ticker HNZ Price 72.47 A. Estimating the proportion of debt D /D+E Market capitalization = number of shares * share price = 320,650 millions*72.47 E = 23.24 billions Working capital = Total current asset – Total current liabilities = 1234.275 millions The working capital being positive, implies that all the cash and cash equivalent is considered as excess cash and should be deducted
Words: 773 - Pages: 4
shareholders’ value: the discounted cash flow techniques to evaluate potential investments allow the company to invest only in profitable projects. Therefore, it can maximize the use of its cash flow to gain profits. Optimize the use of debt in the capital structure: because firms with lower percentage of debt have higher value, Marriott uses this strategy to increase its value and thereby increase it profitability. Repurchase undervalued shares: By buying back its undervalued shares, Marriott can
Words: 818 - Pages: 4
is currently one of the primary producers of crude oil in the United States and is one of the top producers of Alaska crude oil. PPC is currently the lowest cost refiner on the western side of the globe, and has been expanding capital investments in numerous countries. Pioneer began expanding beyond their current industry into several capital ventures. Some have included vertical investments through the production of crude oil to the marketing of refined petroleum products, and horizontal investment
Words: 1208 - Pages: 5
CHAPTER 15 Capital Structure: Basic Concepts Multiple Choice Questions: I. DEFINITIONS HOMEMADE LEVERAGE a 1. The use of personal borrowing to change the overall amount of financial leverage to which an individual is exposed is called: a. homemade leverage. b. dividend recapture. c. the weighted average cost of capital. d. private debt placement. e. personal offset. Difficulty level: Easy MM PROPOSITION I b 2. The proposition that the value of the firm is independent of its capital
Words: 7382 - Pages: 30
CHAPTER 14 COST OF CAPITAL Answers to Concepts Review and Critical Thinking Questions 1. It is the minimum rate of return the firm must earn overall on its existing assets. If it earns more than this, value is created. 2. Book values for debt are likely to be much closer to market values than are equity book values. 3. No. The cost of capital depends on the risk of the project, not the source of the money. 4. Interest expense is tax-deductible. There is no difference between pretax
Words: 3946 - Pages: 16
Djúp Veiði hf Capital Investment Analysis (All currency amounts converted to €.) Djúp Veiði hf manufactures equipment for the commercial fishing industry. The company is considering an investment in a project to manufacture accessories for their existing products. The project involves buying a machine to manufacture the accessories in-house. The machine costs €850,000, with shipping and installation charges on the machine of €37,000. Special building modifications costing €26,000 are required
Words: 787 - Pages: 4
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: 1885 - Pages: 8
