term lasting for 10-30 years. Levered β @ target D/E ratio Ratio=42.2% The target ratio defines the target D/E that the company requires to reach for the credit rating to be applicable. E&P Weighted Average Cost of Capital‚ rE&P-wacc Division wise WACC is essential as each business line has different risk-return profile. Since individual divisional stocks are not traded in the market‚ β for E&P has been calculated by revenue based weighted average of pure-play E&P companies. However it
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increasing shareholder value‚ optimizing the use of debt‚ and repurchasing their undervalued shares. Marriott Corporation relied on measuring the opportunity cost of capital for investments by utilizing the concept of Weighted Average Cost of Capital (WACC). In April 1988‚ VP of project finance‚ Dan Cohrs suggested that the divisional hurdle rates at the company would have a key impact on their future financial and operating strategies. Marriott intended to continue its growth at a fast pace by relying
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Case Analysis: Taco Bell & Kraft Foods Incorporated BUS 600 James Moore August 28‚ 2011 Case Analysis: Taco Bell & Kraft Foods Incorporated Laurie Gannon‚ the Public Relations Director at Taco Bell Corporation received a call that would change the dynamic of the entire corporation. The company’s government relations team informed Laurie that a special interest group in Washington‚ DC named Friends of the Earth‚ had planned to hold a press conference within the next week to discuss
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are BEA’s new beta and cost of equity if it has 40% debt? - BEA’s new beta βL = βLใหม่ = (0.87) βLใหม่ = 1.218 - BEA’s cost of equity RsL = RF + βL(RM - RF) = 6% + (1.218)(4%) = 10.872% c. What are BEA’s WACC and total value of the firm with 40% debt? - BEA’s WACC WACC = = (9%)(1-0.4)(0.4) + (10.872%)(0.6) = 8.683% - BEA’s total value of the firm V0 of firm = ‚ g = 0% = = = = $103‚188‚000 Problems (26-9) International Associates (IA) is about to commence operations
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MBA Program Course: Financial Analysis and Decision Making MBA730 Instructor: Marlena L. Akhbari Wright State University Finance and Financial Services =>? McGraw-Hill/Irwin McGraw−Hill Primis ISBN: 0−390−42334−3 Text: Case Studies in Finance: Managing for Corporate Value Creation‚ 4/e Bruner This book was printed on recycled paper. MBA Program http://www.mhhe.com/primis/online/ Copyright ©2003 by The McGraw−Hill Companies‚ Inc. All rights reserved. Printed in the United
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The authors stated that‚ “Kraft Foods was the second largest food company in the world and the largest food company in the United States‚” (Kerin & Peterson‚ 2010). A.1. Steak Sauce is a condiment “power house” in the Kraft portfolio that made incomparable profits for the company. Lawry’s‚ one of Kraft’s long-lasting competitors‚ endeavors to get a jump on the Holiday weekend (Memorial Day) at Publix to attain the ad and market their new product. Once notified‚ Kraft must lucidly make calculated
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GLOBALIZATION (strategic decisions in context of Oreo and Renault) OREO: Kraft Foods‚ a part of Mondelez International‚ is one of the leading manufacturers of FMCG goods in the World- best known for its confectionary lines. Under Kraft Foods‚ Oreo has expanded all over the World- thus necessitating a perspective on marketing in hitherto unexploited markets in developing nations such as China & India. Kraft uses a multidomestic approach to Globalization‚ which they have adopted in view of several
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broke. Question #5 How does WACC change over time? What do you think might drive the changes? WACC is the opportunity cost of investing in a company‚ or the expected return of shareholders and debt holders. WACC consists of all capital sources and includes common stock‚ preferred stock‚ short-term debt and long-term debt in the calculation. WACC is the average costs of capital financing‚ and tells us how much a company has to pay for each dollar of financing. WACC for any company will fluctuate
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Once funded‚ a project/investment’s performance was measure in two ways. The first being actual performance vs forecasted plan over 1‚ 3‚ and 5 year periods‚ and the second being Economic Value Added (EVA). EVA was calculated as: EVA = EBIT(1-t) – WACC(period capital expenditure) Midland Energy Capital Planning Model • Optimize capital structure • Midland primarily optimized its capital structure by taking advantage of the borrowing capacity inherent in its energy reserves and long term assets
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while PepsiCo’s EVA has been increasing (see Exhibit 1.1). Coca-Cola’s NOPAT has decreased in recent years as a result of slowing sales growth and worsening profit margins. If it were not for Coca-Cola’s decreasing WACC‚ its EVA would decrease more rapidly. If Coca-Cola used a WACC of 12%‚ about the average of the past seven years‚ its EVA would have been $445‚000‚000 in 2000. PepsiCo was able to more than double their EVA in
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