Weighted average cost of capital Essays & Research Papers

Best Weighted average cost of capital Essays

  • Weighted Average Cost of Capital
    Weighted Average Cost of Capital What It Measures The weighted average cost of capital (WACC) is the rate of return that the providers of a company’s capital require, weighted according to the proportion each element bears to the total pool of capital. Why It Is Important WACC is one of the most important figures in assessing a company’s financial health, both for internal use (in capital budgeting) and external use (valuing companies on investment markets). It gives companies an insight...
    550 Words | 2 Pages
  • Weighted Average Cost of Capital
    WACC: Weighted average cost of capital =WACC= SS+B×Rs+BS+B×RB×1-tC note: Rs , cost of equity; RB , cost of debt; tC , corporate tax rate. For cost of equity, Rs, we calculate it by using the SML, according to CAPM model. Rs=RF+β×[RM-RF] As we can see in the chart behind the case, beta of Worldwide Paper Company is 1.10; the Market risk premium (RM-RF) is 6.0%. Because this on-site longwood woodyard project has six year life and the investment spend over two years, the total long of this...
    472 Words | 2 Pages
  • Weighted Average Cost of Capital
    INTRODUCTION: This session long project looks at the calculations used to determine the weighted average cost of capital (WACC). This SLP calculates the WACC for my SLP company – McDonalds, discusses how those calculations were arrived at and briefly describes WACC and what investors use it for. COMPANY NAME: McDonalds Inc Balance sheet date: 31 DEC 07 Market values date: 1 SEP 08...
    1,757 Words | 6 Pages
  • Weighted Average Cost of Capital and Marriott
    Q1: The first financial strategy “Manage rather than own hotel assets” is consistent with growth objectives. The company sold out the hotel assets while keeping a long-term management contract. We calculated the Return on Assets (ROA) from 1978 to 1987, it increased a little in 1979 and kept decreasing to 1987(Exhibit 1). By managing rather than owning the hotel assets, Marriott is able to increase its ROA thereby increasing potential profitability and its financial position in the market....
    1,963 Words | 6 Pages
  • All Weighted average cost of capital Essays

  • Weighted Average Cost of Capital and Yeats
    Extra Credit Assignment: Yeats Valves and Controls Inc. Completed as a Group with the Following Individuals: (in alphabetical order by last name) Adetunji Adeniyi Tung F. Cheng Gregory Chiu Rashmin Patel WenHao Zhang Course Title: Accounting and Finance Course No./Section: MG6093 Instructor: Frank X. Apicella November 28, 2012 Yeats Valves Question The following are questions which should focus...
    1,729 Words | 7 Pages
  • Wacc Weighted Average Cost of Capital
    WACC Weighted Average Cost of Capital Formula The WACC Weighted Average Cost of Capital formula is complex, and can be broken into several components. The individual component costs are provided in the following sections. WACC Weighted Average Cost of Capital Variables V=Firm Total Value (Debt + Preferred Shares + Common Equity + Retained Earnings) Md=Market Value of Debt Mp=Market Value of Preferred Shares Mc=Market Value of Common Equity Mr=Market Value of Retained Earnings...
    565 Words | 3 Pages
  • Finance: Weighted Average Cost of Capital and Capital Structure
    Ryerson University CFIN 401 Section 610 Midterm Exam Version A Fall 2010 ------------------------------------------------- There are 2.0 hours in this exam. ------------------------------------------------- Student Name ____________________________ (Please Print) Student Number _________________________________ Notes: 1. This is a closed book exam. You may only have pens, pencils , a calculator and one cheat sheet double sided on 8 ½ by 11 paper at your desk....
    1,978 Words | 10 Pages
  • Weighted Average Cost of Capital and Discount Rate
    Sampa Video, Inc You have to prepare a presentation to the management of the firm. The presentation should have; analysis of the project, your valuation of the investment and your investment recommendation. You have to be clear and brief and explain the main assumptions and methodologies used in the analysis. The quality of the presentation will be considered in the grading. You have to hand in a handout of the presentation and an executive summary of no more than 2 pages. Guideline...
    329 Words | 2 Pages
  • Weighted Average Cost of Capital and New Product Line
    International Finance Uncle Jim 2011 Brief Case: Flash Memory, Inc. Presentation: By teams of 6 Format: Teams will present a written report and deliver a verbal presentation supported by PowerPoint. Time: Initial introduction October 19 Working groups October 24-November 2 In Class Review November 7 In Class Presentation November 9 Each presentation will be not longer than 15 minutes. Discussion questions to be completed in writing showing all calculations,...
    572 Words | 2 Pages
  • Weighted Average Cost of Capital and Single Hurdle Rate
    2. TELETECH CORPORATION 1. How does Teletech Corporation currently use the hurdle rate? Currently Teletech uses a single hurdle rate for both their Telecommunications Services and Products and Services divisions. The hurdle rate is the cost of capital based on an estimate of the corporation’s WACC. 2. Please estimate the segment WACCs for Teletech (see the worksheet in case Exhibit 1). As you do this, carefully note the points of judgment in the calculation. Corporate...
    657 Words | 3 Pages
  • Weighted Average Cost of Capital and Midland Energy
    Executive Summary: Midland Energy Resources, Inc. is a global energy company with a broad array of products and services. The company operates within three different operations including oil and gas exploration and production (E&P), refining and marketing (R&M), and petrochemicals. Midland has proven to be a very profitable company, with reported operating revenue of $248.5 billion and operating income of $42.2 billion. The company has been in business for over 120 years and employed more than...
    1,750 Words | 7 Pages
  • Weighted Average Cost of Capital and Gentry Motors Inc.
    2 Gentry Motors Inc., a producer of turbine generators, is in this situation: EBIT _ $4 million; tax rate (T) is 35%; debt outstanding (D) $2 million; kd 10%; ke 15%; shares of stock outstanding (N0) 600,000; and book value per share $10. Since Gentry’s product market is stable and the company expects no growth, all earnings are paid out as dividends. The debt consists of perpetual bonds. a. What are Gentry’s earnings per share (EPS) and its price per share (P0)? b. What is Gentry’s...
    324 Words | 1 Page
  • Weighted Average Cost of Capital and Common Stock
    CHAPTER 9 THE COST OF CAPITAL (Difficulty: E = Easy, M = Medium, and T = Tough) Multiple Choice: Problems Easy: Cost of common stock Answer: d Diff: E [i]. Bouchard Company's stock sells for $20 per share, its last dividend (D0) was $1.00, and its growth rate is a constant 6 percent. What is its cost of common stock, rs? a. 5.0% b. 5.3% c. 11.0% d. 11.3% e. 11.6% Cost of common stock Answer: b Diff: E [ii]. Your company's...
    3,767 Words | 19 Pages
  • Weighted Average Cost of Capital and Marriott Corporation
    Butler Lumber Company 1. Why does Mr. Butler have to borrow so much money to support this profitable business? 2. Do you agree with his estimate of the company’s loan requirements? How much will he need to borrow to finance his expected expansion in sales (assume a 1991 sales volume of $3.6 million) 3. As Mr. Butler’s financial adviser, would you urge him to go ahead with, or to reconsider, his anticipated expansion and his plans for additional debt financing? As the banker, would...
    1,850 Words | 8 Pages
  • Stock and Weighted Average Cost
    Q1: The Target Capital structure for Kaynat Manufacting is 50% common stock, 15% preferred stock, and 35% debt. If the cost of common equity for the firm is 19.6%, the cost of preferred stock is 12.9% and the before tax cost of debt is 9.5% what is the weighted average cost of capital? The firm's tax rate is 35%. Answer: WACC = (50% x 19.6%) + (15% x 12.9%) + ( 35% x 9.5% x 65% = Q2: The following are the information of a company: |Type of capital |Book value (Tk)...
    670 Words | 3 Pages
  • Weighted Average Cost of Capital and Systems Segment
    Teletech Corporation The first procedure we took in evaluating the financial position of Teletech was to estimate the Weighted Average Cost of Capital (WACC) for both its Telecommunications segment and its Products and Systems segment and then compare that to the firms corporate WACC. The WACC assesses the amount the risk that an average capital project undertaken by the firm contains. It is also the required rate of return the firm must end up paying in order to later generate funds, which...
    1,139 Words | 3 Pages
  • Weighted Average Cost of Capital and Wide Hurdle Rate
    1) How does Teletech currently compute its hurdle rate and how does it evaluate risky projects? What is wrong with this method? Teletech computes it’s hurdle rate by averaging the past 10 years annual weighted average cost of capital (WACC) rates, and then “massaging” the result into a round percentage. This is not an ideal way to calculate the hurdle rate as it reflects rates of financing from the past when borrowing rates were in different ranges. Teletech evaluates risky projects by...
    478 Words | 2 Pages
  • Finance: Weighted Average Cost of Capital and Market Risk Premium
    Cost of Capital questions and practice problems Questions 1. What does the WACC measure? 2. Which is easier to calculate directly, the expected rate of return on the assets of a firm or the expected rate of return on the firm’s debt and equity? Assume you are an outsider to the firm. 3. Why are market-based weights important? 4. Why is the coupon rate of existing debt irrelevant for finding the cost of debt capital? 5. Under what assumptions can the WACC...
    1,179 Words | 5 Pages
  • Cost of Capital - 1889 Words
    The Cost of Capital for Goff Computer, Inc. Rahul Parikh 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...
    1,889 Words | 6 Pages
  • Cost of Capital - 613 Words
    Dr. Sudhakar Raju FN 6100 QUESTIONS ON CHAPTER 15 (COST OF CAPITAL) 1.) The Wind Rider Company has just issued a dividend of $2.10 per share on its common stock. The company is expected to maintain a constant 7% growth rate on its dividends indefinitely. If the stock sells for $40 a share, what is the company’s cost of equity? 2.) The Ball Corporation’s common stock has a beta of 1.15. If the risk free rate is 5% and the expected return on the market is 12%, what is Ball...
    613 Words | 3 Pages
  • Cost of Capital - 5336 Words
    INTRODUCTION The long-term investments that make today will determine the value of business tomorrow. In order to make long-term investments in new product lines, new equipment and other assets, managers must know the cost of obtaining funds to acquire these assets. The cost associated with different sources of funds is called the cost of capital. . If the business earns more than its cost of capital, the market value of the business will increase. Likewise, if returns on long-term investments...
    5,336 Words | 24 Pages
  • cost of capital - 724 Words
    What is cost of capital? The cost of capital is the cost of obtaining funds, through debt or equity, in order to finance an investment. It is used to evaluate new projects of a company, as it is the minimum return that investors expect for providing capital to the company, thus setting a benchmark that a new project has to meet. Importance The concept of cost of capital is a major standard for comparison used in finance decisions. Acceptance or rejection of an investment project depends on...
    724 Words | 3 Pages
  • Cost of Capital - 2737 Words
    Answers to Warm-Up Exercises E9-1. Answer: Weighted average cost of capital N 10, PV $20,000 (1 0.02) $19,600, PMT Solve for I 8.30% 0.08 $20,000 $1,600, FV $20,000 E9-2. Cost of preferred stock Answer: The cost of preferred stock is the ratio of the preferred stock dividend to the firm’s net proceeds from the sale of the preferred stock. rp Dp Np rp (0.15 $35) ($35 $3) rp $5.25 $32 16.4% E9-3. Cost of common stock equity Answer: The cost of common stock equity can be found by dividing the...
    2,737 Words | 14 Pages
  • The Cost of Capital - 781 Words
    Case Questions Case #5 – Marriott Corporation: The Cost of Capital 1. Are the four components of Marriott’s financial strategy consistent with its growth objective? 2. How does Marriott use its estimate of its cost of capital? Does this make sense? 3. What is the weighted average cost of capital for Marriott Corporation? a. What risk free rate and risk premium did you use to calculate the cost of equity? b. How did you measure Marriott’s cost of debt? 4. If Marriott used a single...
    781 Words | 3 Pages
  • Cost of Capital - 1397 Words
    ogCost of capital First of all I would like to say the I wanted to calculate the cost of debt and cost of equity but the information given in the statements are missing the items needed to calculate the cost of debt and the cost of equity but I would like to analyze the information related to this part The market capitalization already increased in year 2010to 7,016 million from the previous year which was 3,805 million in year2009.also we can see the share price started year2010 with equal...
    1,397 Words | 4 Pages
  • Cost of Capital - 1468 Words
    Cost of Capital Definition: cost of capital is the rate of return that a company must earn on its project investments to maintain its market value and attract funds. The cost of capital to a company is the minimum rate of return that is must earn on its investments in order to satisfy the various categories of investors, who have made investments in the form of shares , debentures and loans. The cost of capital in operational terms refers to the discount rate that would be used in determining...
    1,468 Words | 5 Pages
  • Cost of Capital - 4904 Words
    Cost of Capital Theory of cost of capital Bottom of Form Cost of capitaltheory attempts to explain whether a company's mix of equity and debt affects its stock price. Two types of cost of capitaltheory can be distinguished: the net operating income theory and the net income theory. In the net operating income theory, the mixture of debt and equity does not directly influence a company's financial value. Under the net income theory, the manner in which a corporation structures its...
    4,904 Words | 15 Pages
  • The Cost of Capital - 6125 Words
    Chapter 8 The Cost of Capital 236 CHAPTER 8—THE COST OF CAPITAL TRUE/FALSE 1. Capital refers to items on the right-hand side of a firm's balance sheet. 2. The component costs of capital are market-determined variables in as much as they are based on investors' required returns. 3. The cost of debt is equal to one minus the marginal tax rate multiplied by the coupon rate on outstanding debt. 4. The cost of issuing preferred stock by a corporation must be adjusted to an...
    6,125 Words | 20 Pages
  • Cost of Capital - 753 Words
    WEIGHTED AVERAGE COST OF CAPITAL FOR DELL COMPUTER 1) From the SEC website, the balance sheet of Dell Computer reveals a Book value of debt = $3,394,000,000 and Book value of equity = $4,625,000,000 The same balance shows the breakdown of the long-term debt (book values) in table 1. Table 1 Coupon Rate (%) Maturity Book Value (Face Value in million $) 3.38 06/15/2012 400 4.70 04/15/2013 599 5.63 04/15/2014 500 5.65 04/15/2018 499 5.88 06/15/2019 600 7.10 04/15/2028 396...
    753 Words | 4 Pages
  • Cost of Capital - 1595 Words
    Cost of Capital Firms need to make capital investment i.e., purchasing fixed assets such as factories, machineries, equipment, etc. After deciding what capital investments to make, they need to decide on the financing – sources of capital. The sources: Long-Term Debt, Common Stock, Preferred Stock and Retained Earnings. Then they need to find the cost of obtaining each source of financing today (not historical). Cost of Capital - The rate of return that a firm must earn on its investment...
    1,595 Words | 6 Pages
  • Cost of Capital Ameritrade - 646 Words
    Ameritrade's management should consider the net present value of the proposed advertising program and technology upgrades. They need to make sure that the future cash inflows due to this project outweigh its future cash outflows. Additionally, the riskiness of the project would have to be determined. Ameritrade's managers should also consider what taking on these programs would do to its capital structure. They might have a certain debt to equity ratio they wish to maintain, or perhaps there...
    646 Words | 2 Pages
  • Marriot Corp: Cost of Capital
    Introduction and background We are conducting an analysis of Marriott Corporation for calculating the hurdle rates at each of the firm's three divisions--lodging division, restaurant division and contract service division. Marriott uses Weighted Average Cost of Capital (WACC) as the hurdle rate, and use it to discount the appropriate cash flows when evaluate an investment project. Our goal is to determine the WACC at every division base on the information that the case has provided. First...
    2,540 Words | 7 Pages
  • Nike Cost of Capital - 935 Words
    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? WACC- The weighted average cost of capital is the rate (percentage) that a company has to pay to its creditors and shareholders to finance assets. It is the “cost” of their worth. Companies raise money from many different types of securities and loans and the various required returns are what make up the cost of capital. WACC is used to decide if...
    935 Words | 4 Pages
  • Marriott Corp: the Cost of Capital
    To : President, Marriott Corporation From : FLO299 Subject : Marriott Corporation – The Cost of Capital Date : April 6, 2010 The Importance of the Cost of Capital The cost of capital is important as it forms the basis for Marriott’s investing and financial decisions. By understanding and knowing the cost of capital, Marriott is able to select relevant investment projects for the company, determine incentive compensation, and repurchase undervalued shares when needed. The...
    1,102 Words | 3 Pages
  • Nike, Inc.:Cost of Capital
    Nike, Inc.: Cost of Capital Case 15 Financial Administration FINC 5713-180 Team 1 Fall 2013. October 8, 2013. Introduction Kimi Ford a portfolio manager at NorthPoint Group which is a mutual-fund management firm, is considering to buy some shares from Nike, inc even if it’s share price had declined from the beginning of the year, for the Northpoint Large-cap fund she managed which invested mostly in Fortune 500 companies and it was doing well despite the...
    859 Words | 4 Pages
  • Marriott Cost of Capital - 743 Words
    Marriott cost of capital Objective: 1) Calculate the divisional and the company cost of capital and explain the calculation. 2) Evaluate Marriott's use of company cost-of-capital rate for the individual divisions. Cost of Capital for Lodging Division can be expressed as CC = We*Ce + Wd*Cd. For the weights of debt and equity (We and Wd), the 1988 target-schedule rates of debt-to-assets and debt-to-equity were used as the only measures available in the case. Cost...
    743 Words | 3 Pages
  • The Cost of Capital for Foreign Investments
    CHAPTER 14 The Cost of Capital for Foreign Investments EASY (definitional) 14.1 The ________ for a given investment is the minimum risk-adjusted return required by the shareholders of the firm for undertaking that investment. a) cost of equity capital b) systematic risk c) all-equity beta d) weighted average cost of capital Ans: a Section: The cost of equity capital Level: Easy 14.2 One function of the cost of capital is to _______ for the firm. a) determine the debt to equity...
    1,939 Words | 11 Pages
  • Cost of Capital Nike - 988 Words
    Case Analysis of Nike, Inc.: Cost of Capital Apparently, the issue of Nike’s case is to control and check the calculation cost of capital done by Joanna Cohen who is the assistant of a portfolio manager at NorthPoint Group. But I am willing to tell you that it can be a complex case in which we can doubt about sensitivity analysis done by Kimi Ford (portfolio manager) because her assumptions such as Revenue Growth Rate, COGS / Sales, S &A / Sales, Current Assets / Sales, and Current...
    988 Words | 5 Pages
  • Nike: Cost of Capital - 305 Words
    We recommend a buy for Nike's stock on July 6, 2001. Our analysis consists of a discounted cash flows model. We projected unlevered free cash flows over the next 10 years and discounted them according to our derivation of Nike's weighted average cost of capital. Our analysis suggests the stock is significantly undervalued, given our expectation it will deliver earnings in the future. Below we have analyzed Joanna Cohen's WACC calculation and her projection of cash flows. We then calculate our...
    305 Words | 1 Page
  • Summary Cost of Capital - 2609 Words
    The Cost of Capital 1 Background As investors desire to obtain the best/highest return on their investments in securities such as shares (Equity) and loans to companies such as debentures (Debt), these returns are costs to the companies paying these Dividends (on equity) and Interest (on Debts)! It all depends on the perspective from which we chose to view the calculation (are we Earning or Paying?) Companies MUST consider the cost of financing they receive in the form of equity or debt if they...
    2,609 Words | 18 Pages
  • Cost of Capital in Multinational Firms
     The Cost of Capital in Multinational Firms Monique N. Mixon University of Maryland University College FIN 630, 04 November 2012 Turnitin.com=_________ ABSTRACT This paper examines the cost of capital for multinational firms and determines that the multinational firm should use the weighted average cost of capital (WACC) to evaluate international and domestic investment decisions and to magistrate the enactment of subsidiaries domestically and internationally....
    779 Words | 3 Pages
  • Marriott Corporation: the Cost of Capital
    HBR Case #1 Marriott Corporation: The Cost of Capital Group 16—Tutorial Mon 11:30am Group members LIU Ying, Chloe | 1155019350 | LUO Yingying, Irika | 1155020931 | TIAN Tian, Sarah | 1155019114 | WU Jiajie, Jesse | 1155019061 | 17 September 2012 Executive Summary By 1987, Marriott Corporation had grown into a large multi-dimensional company with over $5 billion assets in lodging, contract services and restaurants. The company enjoyed fast growth in both sales and assets at...
    2,890 Words | 9 Pages
  • Nike Cost of Capital solution
    I. Introduction Kimi Ford, a portfolio manager for the mutual-fund management group NorthPoint, was reviewing the financials of Nike Inc. to consider buying shares for the NorthPoint Large-Cap Fund that she managed. A week prior, Nike Inc. held an analysts’ meeting to share their 2001 fiscal results and develop a strategy to revitalize the company. II. Background of Firm Nike’s revenues since 1997 had grown from $9 billion, while net income had fallen $220 million. A study written by...
    1,030 Words | 4 Pages
  • nike cost of capital - 1990 Words
    UV0010 NIKE, INC.: COST OF CAPITAL On July 5, 2001, Kimi Ford, a portfolio manager at NorthPoint Group, a mutual-fund management firm, pored over analysts’ write-ups of Nike, Inc., the athletic-shoe manufacturer. Nike’s share price had declined significantly from the beginning of the year. Ford was considering buying some shares for the fund she managed, the NorthPoint Large-Cap Fund, which invested mostly in Fortune 500 companies, with an emphasis on value investing. Its top holdings included...
    1,990 Words | 27 Pages
  • Marriott Corporation: the Cost of Capital
    Question 6 What is the cost of capital for the lodging and restaurant divisions of Marriott? Answer: The cost of capital for lodging is 9.2% and the cost of capital for restaurants is 13.1% Calculation: WACC = (1-t) * rd * (D/V) + re* (E/V) Where: D= market value of DEBT re = aftertax cost of equity E = market value of EQUITY V = D+E rd = pretax cost of debt t = tax rate To calculate the formula above, we need to determine each component Tax rate (t) 56% --> calculated before...
    1,053 Words | 9 Pages
  • Marriott Corporation” the Cost of Capital
    Case #3 “Marriott Corporation” The Cost of Capital” What is the weighted average cost of capital for the Marriott Corporation and cost of capital for each of its divisions? – What risk-free rate and risk premium did you use to calculate the cost of equity? – How did you measure the cost of debt? – How did you measure the beta for each division? Solution What risk-free rate and risk premium did you use to calculate the cost of equity? – Risk-free rate proxy The...
    952 Words | 5 Pages
  • Cost of Capital - Encana Corp
    [pic] EnCana Corporation -Cost of Capital Nabil Naouli Yong Peng Ahmed Alenazi Raj Kancharapu Table of Contents 1. Introduction 2 2. History 2 a. Top Competitors 4 b. Major Product and Services 5 c. SWOT Analysis 5 3. Calculating Cost of Capital 6 a. Calculating Cost of Equity 7 i. Risk free rate 7 ii. Market Risk Premium 8 iii. Beta 8 b. Calculating Cost of Debt 9 c. Weighted Average Cost of Capital ( WACC ) 10 d. WACC- EnCana Corp. 2010 12 4....
    2,325 Words | 10 Pages
  • Marriott Corporation: the Cost of Capital
    Marriott Corporation: The Cost of Capital (Abridged) Are the four components of Marriot's financial strategy consistent with its growth objective? Since its foundation in 1927 Marriott Corporation grew into one of the leading lodging and food services in the US. With three major business lines: lodging, contract services and related business, Marriott has the intention to remain a premier growth company. To achieve this goal the corporation’s strategy is to develop aggressively appropriate...
    2,332 Words | 9 Pages
  • Nike Cost of Capital Case
    Introduction and Background Kimi Ford is a portfolio manager at NorthPoint Group, a mutual-fund management firm. In July 2001, Ford considered buying shares of Nike, Inc., the well-known athletic shoe manufacturer. It would be prudent of Ford to base her assessment on Nike’s financial reports for 2001. Around the same time, Nike held an analysts’ meeting to disclose those financial results. They also addressed ways to revitalize the company, since share price was beginning to decline and...
    2,423 Words | 8 Pages
  • Nike Inc Cost of Capital
    Introduction Kimi Ford is a portfolio manager at NorthPoint Group, a mutual-fund management firm. She is evaluating Nike, Inc. (“Nike”) to potentially buy shares of their stock for the fund she manages, the NorthPoint Large-Cap Fund. This fund mostly invests in Fortune 500 companies, with an emphasis on value investing. This Fund has performed well over the last 18 months despite the decline in the stock market. Ford has done a significant amount of research through analysts’...
    2,974 Words | 8 Pages
  • Marriot Corporation Cost of Capital
    1. What is the weighted average cost of capital for Marriot Corporation? Briefly outline the key assumptions that you made in computing the WACC. 2. What is the cost of capital for the lodging and restaurant divisions of Marriot Corporation? Briefly outline the key assumptions that you made in computing the cost of capital and outline any limitations that are presented by your analysis. 3. If Marriot uses a single company-wide cost of capital for evaluating investment opportunities in each of...
    2,056 Words | 5 Pages
  • Marriott Corporation: the Cost of Capital
    Marriott Corporation: The Cost of Capital Introduction Dan Cohrs of Marriott Corporation has the important task of determining correct hurdle rates for the entire corporation as well as each individual business segment. These rates are instrumental in determining which future projects to pursue and thus fundamentally important for Marriott’s growth trajectory. This case analysis seeks to examine Marriott’s financial strategy in comparison with its growth goals as well as evaluate a...
    1,328 Words | 5 Pages
  • Cost of Capital FIN 571
     The Cost of Capital Benedict Amanor, Yolanda Brown-McCutchen, Edith Compean, Angel Longino and Melissa Shea-Brooks FIN/571 May 18, 2015 William Stokes The Cost of Capital In our fifth week of understanding the practices of Corporate Finance, we reviewed the Cost of Capital video. This video provided information on Pfizer, a researched based pharmaceutical company that makes products to help face health care challenges. Our goal is to highlight the cost of capital as...
    455 Words | 2 Pages
  • Nike Cost of Capital - 963 Words
    Nike Cost of Capital Analysis October 22, 2010 1 I. Introduction In this case analysis Kimi Ford, a portfolio manager for a large cap value mutual fund, NorthPointGroup is considering adding shares of Nike, Inc., an athletic shoe manufacturer as a new position in her fund. On July 5, 2001, Nike's share price had declined significantly since the beginning of the year....
    963 Words | 5 Pages
  • Marriott Cost of Capital - 2497 Words
    1) Executive Summary Marriott needs to calculate hurdle rates which will be used in its investment project selection. The company chooses to use cost of capital as its hurdle rate. Since the company has three business divisions and the cost of capital in each division varies and differs from that of Marriott as a whole, each division needs to have its own hurdle rate. The reason behind this practice is the company's strategy which focuses on growth. Using a single hurdle rate for the whole...
    2,497 Words | 8 Pages
  • The cost of capital wacc - 1867 Words
    Solutions to Chapter 12 The Cost of Capital 1. The yield to maturity for the bonds (since maturity is now 19 years) is the interest rate (r) that is the solution to the following equation: [$80  annuity factor(r, 19 years)] + [$1,000/(1 + r)19] = $1,050 Using a financial calculator, enter: n = 19, FV = 1000, PV = (-)1050, PMT = 90, and then compute i = 7.50% Therefore, the after-tax cost of debt is: 7.50%  (1 – 0.35) = 4.88% 2. r = DIV/P0 = $4/$40 = 0.10 = 10% 3. = [0.3  7.50% ...
    1,867 Words | 9 Pages
  • Lex Cost of Capital - 514 Words
    Lex Service PLC--- Cost of Capital In 1928 Lex Garages Limited, at the time of public incorporation, had single garage in London.After 60 years, Lex Service PLC became a leading company in automotive distribution and leasing in the United Kingdom. In late 1950, Lex obtained from Volvo Car Corporation the exclusive franchise to import and distribute Volvo cars in the United Kingdom that ended in1992 four years before the scheduled termination date. This news dropped the share price of Lexto 30%....
    514 Words | 2 Pages
  • Marriott Corporation: the Cost of Capital
    FIN – 502, dR. GEORGE gALLINGER | Case Analysis – Marriott | Detailed - Individual Assignment | | Ankur Sharma | Evening Accelerated MBA - T/Th – Class of 2011 | W P Carey School of Business, Arizona State University | The following case analysis portraits the use of capital asset pricing model to compute the weighted average cost of capital for Marriott and each of its divisions. The flow of events below is following a string of different evaluations, each of which is...
    3,318 Words | 13 Pages
  • Corporate Finance: Cost of Capital
    Chapter 10 The Cost of Capital LEARNING OBJECTIVES After reading this chapter, students should be able to: • Explain what is meant by a firm’s weighted average cost of capital. • Define and calculate the component costs of debt and preferred stock. • Explain why retained earnings are not free and use three approaches to estimate the component cost of retained earnings. • Briefly explain why the cost of new equity is higher than the cost of retained earnings, calculate...
    4,500 Words | 19 Pages
  • Marriott Corporation: the Cost of Capital
    1. How does Marriott use its estimate of its cost of capital? Does this make sense? Marriott has defined a clear financial strategy containing four elements. To determine the cost of capital, which also acted as hurdle rate for investment decision, cost of capital estimates were generated from each of the three business divisions; lodging, contract services and restaurants. Each division estimates its cost of capital based on: Debt Capacity Cost of Debt Cost of Equity All of the above...
    2,442 Words | 8 Pages
  • Nike Cost of Capital - 677 Words
    Executive Summary Wanting to add Nike’s share to her portfolio, Kimi Ford asked her new assistant, Joanna Cohen, to estimate Nike’s cost of capital. Cohen, later, came up with the cost of capital of 8.4% that was contradicted to Ford’s cost of capital of 12%. This report points out flaws of Cohen’s assumption and recalculates the WACC to obtain the most accurate cost of capital. In the cost of equity calculation, we will use CAPM, the dividend discount model (DDM), and the earnings...
    677 Words | 3 Pages
  • Corporate Finance - Cost of Capital
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