Midland Energy Resources‚ Inc.: Cost of Capital Situation Analysis Company is trying to estimate cost of capital for each of the three divisions‚ Exploration and Production (E&P)‚ Refining and Marketing (R&M) and Petrochemicals. Cost of capital analysis is used in taking following decisions in the organization: Project appraisal Financial accounting Stock repurchases decisions Merger & Acquisitions Performance assessment The estimates produced by treasury were criticized because of specific
Premium Mathematics Asset Finance
Energy Resources and their Uses in Producing Electricity Renewable energy is energy drawn from natural processes that are restored quicker than they are used up‚ some renewable energy resources are biomass‚ food‚ wind‚ waves‚ flowing water‚ solar and geothermal. The sun however‚ is known to be the ultimate energy resource since almost all energy resources originate from the sun’s energy. This is possible according to the law of conservation of energy which states that energy can’t be destroyed
Premium Fossil fuel Energy development Natural gas
INTRODUCTION TO CAPITAL BUDGETING Overview 159 7.1 The NPV Rule for Judging Investments and Projects 159 7.2 The IRR Rule for Judging Investments 161 7.3 NPV or IRR‚ Which to Use? 162 7.4 The “Yes–No” Criterion: When Do IRR and NPV Give the Same Answer? 163 7.5 Do NPV and IRR Produce the Same Project Rankings? 164 7.6 Capital Budgeting Principle: Ignore Sunk Costs and Consider Only Marginal Cash Flows 168 7.7 Capital Budgeting Principle: Don’t Forget the Effects of Taxes—Sally and Dave’s
Premium Net present value Internal rate of return Cash flow
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 Liability
Premium Finance Stock Weighted average cost of capital
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 are below the cost of capital‚ market values will decline. Therefore‚ how we manage capital is extremely important to fulfilling the basic objective of increased
Premium Interest Capital structure Pharmaceutical industry
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 corporate
Premium Weighted average cost of capital Arithmetic mean Average
What’s your real cost of capital? By James J. McNulty‚ Tony D. Yeh‚ William s. Schulze‚ and Michael H. Lubatkin Harvard Business Review‚ October 2002 Issue of the article: valuing investment projects Number of pages: 12 Daniel Miravet Campos Part 1. Executive summary This article is fundamentally based on the exposition of a new method to calculate the cost of capital for a company (MCPM)‚ to meet the inefficiencies of the current one (CAPM). In valuing any investment project or
Premium Stock market Investment Stock
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 Corp.’s cost of equity capital? 3.) Stock
Premium Stock Weighted average cost of capital Stock market
consumable goods. B) capital goods. C) tangible goods. D) depreciation goods. Answer: B 2) In the capital market‚ households ________ supply the financial resources to firms that allow them to purchase ________. A) indirectly; capital B) directly; capital C) indirectly; land D) indirectly; labor Answer: A 3) Firms that offer to pay for college tuition for their employees are investing in ________ capital. A) tangible B)
Premium Capital Investment Capital accumulation
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 the
Premium Finance Net present value Weighted average cost of capital