NIKE‚ INC.: COST OF CAPITAL Book value vs. Market value While calculating the Nike’s cost of capital using both the book value (Exhibit 1.1) and the market value (Exhibit 1.2)‚ I could notice the mistake Cohen made finding the equity value. Cohen used the book value to reflect equity value. Although the book value is an accepted measure to estimate the debt value‚ the equity’s book value is an inaccurate measure of the value perceived by the shareholders. Since Nike is a publicly traded company
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Graduate School of Business Administration University Version 2.0 of Virginia UVA-F-1353 Version 2.0 Nike‚ Inc.: Cost of Capital On July 5‚ 2001‚ Kimi Ford‚ a portfolio manager at NorthPoint Group‚ a mutual fund management firm‚ pored over analyst write-ups of Nike‚ Inc.‚ the athletic shoe manufacturer. Nike’s share price had declined significantly from the start of the year. Kimi was considering buying some shares for the fund she managed‚ the NorthPoint Large-Cap Fund‚ which invested mostly in
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International Capital Structure and the Cost of Capital Agenda 1 2 3 4 5 International Capital Structure and the Cost of Capital Analyzing Cost of Capital among Countries Cross Border Listing of Stocks International Asset Pricing Model (IAPM) The Financial Structure of Subsidiaries Case Analysis - AES Corporation 6 International Capital Structure and the Cost of Capital Your Logo International Capital Structure and the Cost of Capital • Firms are becoming multinational in
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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 of Equity
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Cost of Capital at Ameritrade What factors should Ameritrade management consider when evaluating the proposed advertising program and technology upgrades? Why? Mr. Ricketts believes that his role as CEO is to maximize shareholder value by accepting any project whose expected return on investment is greater than the cost of capital. Therefore‚ the main factors that Ameritrade management should consider are the expected return on investment for the project‚ and how this compares to the project’s
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Case Study of Cost of Capital at Ameritrade 1-a How can the CAPM be used to estimate the cost of capital for a real business investment decision? CAPM results can be compared to the best expected rate of return that investor can possibly earn in other investments with similar risks‚ which is the cost of capital. Under the CAPM‚ the market portfolio is a well-diversified‚ efficient portfolio representing the non-diversifiable risk in the economy. Therefore‚ investments have similar risk if they
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addition‚ they did not take into consideration that as a global company with operations in countries that are hugely different from the U.S they needed a more sophisticated way to think about risk and the cost of capital around the world. besides‚‚ with AES’s international expansions‚ the model of capital budgeting was not supposed to be exported to projects overseas‚ since the same model became increasingly strained with the expansions in brazil and Argentina because hedging key exposures such as regulatory
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Service Plc-Cost of Capital Objective: Lex service Plc sold its various subsidiaries and other assets in between 1991 and 1993 which provides more than £340 million of funds. To reinvest this huge amount of funds it evaluates many investment options and acquisitions. To evaluate the worth of new investments‚ Lex uses discounted cash flow analysis. In order to employ DCF analysis method‚ discount rate or cost of capital required. Now the question is arises ‘what should be real cost of capital’. Case
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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
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Multinational Cost of Capital Capital Structure‚ Risk and the Cost of Capital for Multinational Companies (1713 words) 2015 Table of Contents Introduction 2 Literature Review 2 Capital Structure‚ Risk and the Cost of Capital for Multinational Companies 2 Criticism to the work and the upstream-downstream hypothesis 2 Conclusion 2 References 2 Introduction “Theoretically‚ MNEs should be in a better position than their domestic counterparts to support higher debt ratios because their cash flows
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