Timbuk2 is a San Francisco-based corporation that has been creating messenger bags for over 20 years. Timbuck2 was founded by Rob Honeycutt in 1989. Originally named Scumbags, this corporation started out as a simple messenger bag for work and has now become a full-fledged business of various customized bags. The popularized and successful corporation has recently began making laptop bags in China. There are many factors that may affect the corporation’s decision to begin its expansion in China. San Francisco and China have different competitive dimensions provided in their plants. Their volume and rate of production also varies. Because the biggest cost difference in production in China and in San Francisco is shipping, costs…
Investment Thesis The Timken Company is the largest tapered roller bearings manufacturer in the world and one of the largest manufacturers of alloy and specialized steel in the world. The company reports revenues in three business segments: Steel (31% of 2005 revenue), Automotive (32%), and Industrial (37%). I feel that Timken is capable of delivering solid EPS and top-line revenue growth over the next two years, driven largely by demand for industrial bearings and steel products in key end-markets, including aerospace & defense, energy, rail, mining, and construction. Timken’s Industrial and Steel margins have been expanding since 2004, and with strong demand for the company’s products and global capacity constraints, I forecast margin expansion through 2008.…
The purpose of this project is to find the Weighted Average Cost of Capital (WACC) for Home Depot. Investopedia.com reveals that the WACC is “a calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All capital sources - common stock, preferred stock, bonds and any other long-term debt - are included in a WACC calculation. All else equal, the WACC of a firm increases as the beta and rate of return on equity increases, as an increase in WACC notes a decrease in valuation and a higher risk” (Investopedia.com). We will attempt to provide information regarding the following: 1. Description of how we achieved the WACC. 2. Calculations used to obtain WACC. 3. Explanation of the results. 4. Sources of our data. 5. Discussion of confidence level in our answer, as well as any limiting assumptions if applicable.…
After a thorough investigation into the JJJ Company the ad hoc committee has compiled their findings. As our CEO I know that you are anxious to move forward with the acquisition, however you have made it clear that you will only move forward if the purchase will yield greater profit and bigger dividends. After reviewing all of the findings the committee and I have decided to recommend that we do not move forward with the acquisition.…
The case is best suited as a firm-valuation exercise in a first-year MBA finance course. It…
Blackmores LTD (BKL) which started in the 1930s is a major player in developing and marketing products and services that deliver a more natural approach to health, based on their expertise in vitamins, minerals, herbs and nutrients.…
Study period : 10 Minutes duration Writing period : 90 Minutes duration Permitted materials: Non-programmable calculator Paper-based dictionary You must attempt to answer all questions. All questions to be completed in the script book provided.…
The WACC for Collinsville, according to our estimations, came up to about 16.22% (Exhibit I). We took the average of the unlevered betas of comparable companies, 0.91, and relevered it according to Dixon’s target capital structure. Dixon’s 5-year historical debt ratio was 27.5%, but this approach would not be reliable due to its steep downturn debt ratio from 51% in 1975 to 6% in 1979. Thus, we thought that the best estimate of the target debt ratio is 15% for calculation of the WACC.…
McCaw Cellular Communications is a cellular telephone pioneer in the United States is faced with a challenging decision regarding the future of the firm. The direction of the company will depend on whether CEOs of McCaw Cellular Communication and AT&T agree on an appropriate price of the company. In order to capture the value of McCaw Cellular Communications, three financial valuation models were developed while taking into account the trends in the industry and potential synergies from the take-over.…
* Torrington would help Timken gain foothold in Europe from where it derived 17% of its revenues, hence increasing its market share and elevating it to top three position in the in the global bearing Industry which will increase its global presence.…
GROUP SUBMISSION: Due 27 June 2011 Midnight American Chemical Corporation CASE QUESTIONS Read the American Chemical Corporation case that was handed to you. The underlying question to be answered is should Dixon acquire the Collinsville plant. In your case write-up, you can discuss the questions given below. Please note that the given questions are to be used only as a guide for your discussion. You do not need to answer the questions in the sequence they are presented. You can use the spreadsheet called AmericanChemCorp.xls (posted on instructor) to do your computations. Financial analysis 1. Extract all the important information given in the case study (text, footnotes and exhibits) that you will need as part of your set of assumptions in cash flow analysis, e.g. the marginal tax rate, net working capital, salvage value of the Collinsville plant, etc. 2. Using the information extracted in (1) above and relevant tables in the exhibits, estimate the expected incremental free cash flows associated with the acquisition of the Collinsville plant a. Without the laminate technology. b. With the laminate technology. 3. What is the IRR for the Collinsville investment with and without the laminate technology? Using the IRR, which of the two options is better? Estimating the discount rate 4. What is the appropriate beta for the Collinsville project? 5. Estimate the cost of equity capital appropriate for the evaluation of the incremental cash flows associated with the Collinsville investment. 6. Determine the after-tax cost of debt for the project. 7. Estimate the weighted average cost of capital (WACC) appropriate for the valuation of the Collinsville investment. Project Valuation 8. Using the discount rate determined above, estimate the net present value (NPV) of the Collinsville investments a. without the laminate technology b. with the laminate technology 9. Should Dixon Corporation acquire the plant? Is the Collinsville investment attractive on economic grounds?…
In late October 2002, Sir John Sunderland, chairman and CEO of Cadbury Schweppes, contemplated the future of his global confectionery and beverage company. Over the previous decade, the company had made several acquisitions to complement its portfolio of chocolate, soft drinks, sugar confectionery (candy), and gum. Now it was considering a bid for Adams, the number two player in the worldwide gum business and, with its Halls brand, a leader in sugar confectionery. After researching the acquisition for many months, his Chief Strategy Officer Todd Stitzer and the Adams deal team were approaching the point of no return. Sunderland knew that they would have to bid more than $4 billion to have any chance of winning Adams. Should they go ahead with the offer and if so, was all debt financing of the bid appropriate? At this lofty price, how certain could the Cadbury Schweppes’ team be that they could create value? He wondered, was the strategy behind the acquisition sound, and could the leadership team successfully execute an acquisition and integration plan of this magnitude? (Exhibits 1, 1a, and 2).…
Timken Company requires a report on its consideration to acquire Torrington from Ingersoll-Rand. This reports provides the needed information on Torrington’s worth, price at which Torrington could be acquired and the acquisition strategies to negotiate its deal. The evaluation uses the discounted cash flow analysis using WACC to calculate the value of Torrington worth with synergies. The value turned out to be more than the estimated minimum value of the target. The final recommendation is to proceed with the acquisition as planed which would be beneficial to the Timken.…
Estimation of cost of capital Net Debt (market ≈ balance) Equity (market value) Cost of debt D/V E/V Marginal tax rate Estimated WACC Terminal Value EV/EBITDA projection EBITDA in 1998 EV in 1998…
Then we calculated the terminal value of Teuer Furniture at 2018 using the proposed long-term cash flow growth of 3.5%. Finally, we discounted all FCFs along with the terminal value to present value using the proposed cost of capital of 12.1% to reach at the value of Teuer Furniture Company as a whole ($300,276). Since, Teuer Furniture has no debt in its capital structure; therefore, this value is the same as the value of owners' equity of Teuer Furniture. Hence, by dividing this value by the number of shares outstanding (9,945 shares), we obtained a price per share of $30.19.…