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 the cost of debt is tax adjusted and the cost of preferred is not. Explain why retained earnings are not free and use three approaches to estimate the component cost of retained earnings. Briefly explain the two alternative approaches
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A further way of raising funds that has become popular is through venture capital. Merchant banks and investment specialists may be willing to provide finance for a promising and fast-growing smaller business. This usually involves a package that is a mix of share and loan capital. Businesses loans may be available to firms setting up in rural areas or where there is high unemployment. Once a business is up and running there are various ways of financing its expenditures. Expensive items of equipment
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Case Studies Kao Corporation1 Background The Kao Corporation is Japan’s largest soap and cosmetic company. They have developed from being a minor player to being number two in the Japanese market in less than ten years and are the sixth largest soap and cosmetic company in the world. Innovation Claim to Fame Kao was founded in 1890 as the Kao Soap Company with the motto‚ ‘Cleanliness is the foundation of a prosperous society’. In the 1940s Kao launched the first Japanese laundry detergent
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VISHAL ENGINEERING ENTERPRISES CASE SOLUTION DATA GIVEN Total Assets Total Sales Growth Rate Cut‐off rate Option 1 Purchase Price Pre Tax Benefits Depreciation Option 2 Lease Rental Maintenance Post Tax Cost of Borrowing Option3 Hire Purchase Instalment Interest rate Useful Life Analysis ‐ Option 1 ‐ Ownership and Operation Rupees in Lakhs Sr. No 1 2 3 4 5 6 7 8 Particulars Intial Cost Benefits Received Depreciation (WDV @ 25%) Tax Sheild On Depreciation (3 x .35) Net Salvage value Post Tax Cash Flow (1+2+4+5)
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Case Study - Salesforce.Com: Cloud Services Go Mainstream Salesforce.com‚ one of the most disruptive technology companies of the past few years‚ has single-handedly shaken up the software industry with its innovative business model and resounding success. Salesforce provides customer relationship management (CRM) and other application software solutions in the form of software as a service leased over the Internet‚ as opposed to software bought and installed on machines locally. The company was
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Definitions Product Definitions for Trade Finance BAFT-IFSA Global Trade Industry Council February 2012 Product Definitions for Traditional Trade Finance Section 1: Introduction Banks have long provided trade finance services - processing information‚ managing documents‚ providing financing‚ and facilitating payments related to trade transactions through various products. With the advent of technology‚ new variations of trade finance products (specifically new open account products) have
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“Organizational Behavior“ Case Study “Managing Motivation in a Difficult Economy” Question 1: Based on the five management systems introduced by Claussen‚ the dependent and independent variables are as follows: Independent Variable * Age * Tenure * Management style * Area * Job satisfaction Dependent Variable * Turnover rate * Sales & Profit * Employees productivity | From above it can be noticed that there are different independent variables that affect the dependent variables. Age
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Mortgage Servicer Needs Assessment For McBride Financial Services Mitchell Chong March 18‚ 2013 CIS/568 Saundra McDavid CONTENTS Purpose of Document 3 Overview 4 Needs Elicitation 5 Needs Description 7 Gap Analysis 9 Use Cases 10 References 11 Purpose of Document According to McBride Financial Services (2011)‚ their mission statement states “McBride Financial Services will be the preeminent provider of low cost mortgage services using state of the art technology in the five state
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Business Management | What is diversity? | Sholunda Cruz Business Management 5/20/2011 Diversity is becoming an increasingly important factor in not only organizational life but organizations world-wide as well. As organizations are taking that leap into globalization there becomes a need to know about different cultures and how they function. Globalization has become a prominent factor in many companies. In order for companies to be able to compete they need to have a multicultural variety
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1. I do not believe that the representation is a fair indicator of the effects of diversity training programs. I have more of the belief that these programs are to improve relationships among workers and the workers morale. I do think that it is good for a company to be more diversified‚ but that does not mean that those individuals will be more qualified for the top management positions. For example‚ if there are more white males who have masters degrees than women or minorities‚ which might just
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