...Final Exam CorporateFinance FINC 650 1. Which of the following is not considered a capital component for the purpose of calculating the weighted average cost of capital as it applies to capital budgeting? a. b. c. d. e. Long-term debt. Common stock. Short-term debt used to finance seasonal current assets. Preferred stock. All of the above are considered capital components for WACC and capital budgeting purposes.
2. A company has a capital...

...Advanced CorporateFinance I SS 2012
Problem Set 1 Valuing Cash Flows
Problem Set 1
Valuing Cash Flows
Exercise 1 (Ex. 11.2 - 11.6 GT): Assume that Marriott’s restaurant division has the following joint distribution with the market return: Market Scenario Bad Good Great .25 .50 .25 Probability Market Return (%) -15 5 25 YR 1. Cash Flow Forecast $40 million $50 million $60 million
Assume also that the CAPM holds. 11.2 Compute the expected year 1...

...dividend of $1.00 per share. The stock has a required return of 10 percent. What price earnings ratio must the stock have one year from now so that investors realize their expected return?
7. Heavy Metal Corp. is a steel manufacturer that finances its operations with 40 percent debt, 10 percent preferred stock, and 50 percent equity. The interest rate on the company’s debt is 11 percent. The preferred stock pays an annual dividend of $2 and sells for $20 a share. The...

...method is a better method to use, and not the coupon rate as the required
return for debt.
2. Compute the cost of common equity using the CAPM model. For beta, use the average
beta of three selected competitors. You may obtain the betas from Yahoo Finance.
Assume the risk free rate to be 3% and the market risk premium to be 4%.
Risk free Rate 3%
Market risk premium, MRP 4%
Competitors Beta As on October 6, 2010
Dendreon Corp .65...

...assumptions, without any transparency, into a single number: the multiple.
Many companies require over ten years of value-creating cash flows to justify their stock prices. Ideally, the explicit forecast period should capture at least one-third of corporate value with clear assumptions about projected financial performance.
While the range of possible outcomes certainly widens with time, we have better analytical tools to deal with an ambiguous future than to place an...

...order to maximize firm value, management should invest in new assets when cash flows from the assets are discounted at the firm’s COST OF CAPITAL and result in positive NPV. The most expensive source of capital is usually NEW COMMON STOCK. Many corporatefinance professionals favor the CAPM for determining the cost of equity. Why? The variables in the model that apply to public corporations are readily available from public sources. Which is true? A firm should...

...analyst after successfully completing your postgraduate study. Your first assignment involves demonstrating a thorough grasp of Mean-Variance Analysis and Portfolio Theory, which coincidentally was your most favourite topic in Principles of Modern Finance module. Before your arrival, a more experienced analyst had been working on two projects for a client, and has already estimated the risk and return characteristics of two projects as well as the correlation coefficient between...

...Hi, I need an Introduction and conclusion for this case. Please refer some company background and data that base on the case for introduction (I put the link for this case on other attachment). I already got the answer for question 1-3. Need a summary of my solution for conclusion.
About 2 pages total.
Question :
Nike, Inc.: Cost of Capital
1 What is the WACC and why is it important to estimate a firm’s cost of capital? Do you agree with Joanna Cohen’s WACC calculation? Why or why not?...