Benchmark) 2.3 WACC estimation Compute WACC WACC = wd rd (1-T) + wps rps + ws rs = (13.3B/64.6B*1.85) + 0 + 51.2B/64.6B* 6.23% = 5.3% Investors use WACC to help decide whether a company represents a good investment opportunity. To some extent‚ WACC represents the rate at which a company produces value for investors—if a company produces a return of 20% and has a WACC of 11%‚ then the company creates 9% additional value for investors. If the return is lower than the WACC‚ the business
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Cultural Intelligence (CQ). The aim of this paper is to illustrate the concept of CQ through the analysis and evaluation of the case of the merger between Kraft and Cadbury. Contents CQ: Cultural Intelligence 1 Components of Cultural Intelligence 1 Cultural Intelligence in Mergers and Acquisitions 2 Kraft Takes Over Cadbury 2 Cadbury 2 Kraft Foods 2 Pitfalls of Poor Cultural Intelligence 3 Evaluation 3 Summary 4 Exhibit 1 5 Exhibit 2 6 Bibliography 7 CQ: Cultural Intelligence
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America’s best food and beverage company‚ and we’ll get there by continuing to offer products consumers love‚ creating a performance-based culture that motivates and excites employees and becoming the best investment in the industry." - Kraft CEO Tony Vernon Kraft Foods Group is one of the biggest FMCG companies in North America with the annual revenues of more than $18 billion. With the courage of a startup and the base of a powerhouse‚ they have a mission to be one of the best food and Beverage
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but when it began being applied to international projects‚ it was giving the company unrealistic NPV values. While some concern existed‚ having no alternative‚ they continued to use the original method. By failing to take into account increased WACC‚ currency risk‚ political risk‚ and sovereign risk‚ the company had developed projects that began failing in the early 2000’s. The mistake by the company destroyed its stock price and market capitalization‚ losing millions of stockholders equity in
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|The External Factor Evaluation (EFE) Matrix | | | | |Key External Factors |Weight |Rating |Weighted Score | |Opportunities | | | | |1. U.S. sales of organic food and beverage have increased from
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Question 6 What is the cost of capital for the lodging and restaurant divisions of Marriott? Answer: The cost of capital for lodging is 9.2% and the cost of capital for restaurants is 13.1% Calculation: WACC = (1-t) * rd * (D/V) + re* (E/V) Where: D= market value of DEBT re = aftertax cost of equity E = market value of EQUITY V = D+E rd = pretax cost of debt t = tax rate To calculate the formula above‚ we need to determine each component Tax rate (t) 56% --> calculated before LODGING
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these is Country Time Lemonade. Country Time Lemonade is a powered drink mix produced by Kraft Foods (Kraft Foods. n.d.). For as long as I can remember it was the one brand of lemonade that was always in my parents house‚ and besides iced tea the popular drink in our household during the summer. It was a quick and simple drink to make. All that was needed was a pitcher‚ water and of course the drink mix. Kraft Foods first introduced Country Time Lemonade in 1975 (Horwitz‚ J. & Singley‚ P.). In
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Answers to Warm-Up Exercises E9-1. Answer: Weighted average cost of capital N 10‚ PV $20‚000 (1 0.02) $19‚600‚ PMT Solve for I 8.30% 0.08 $20‚000 $1‚600‚ FV $20‚000 E9-2. Cost of preferred stock Answer: The cost of preferred stock is the ratio of the preferred stock dividend to the firm’s net proceeds from the sale of the preferred stock. rp Dp Np rp (0.15 $35) ($35 $3) rp $5.25 $32 16.4% E9-3. Cost of common stock equity Answer: The cost of common stock equity can be found by dividing the dividend
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result interest rates and money costs generally are relatively low. The WACC for two mutually exclusive projects that are being considered is 8%. Project S has an IRR of 20% while Project L ’s IRR is 15%. The projects have the same NPV at the 8% current WACC. However‚ you believe that the economy is about to recover‚ and money costs and thus your WACC will also increase. You also think that the projects will not be funded until the WACC has increased‚ and their cash flows will not be affected by the change
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hurdle-rate system. The tasks for the student are to resolve the debate‚ estimate weighted average costs of capital (WACCs) for the two business segments‚ and respond to the raider. Suggestions for complementary cases: “Nike Inc.” (case 13) gives an introductory exercise in the estimation of the cost of capital. “Coke vs. Pepsi‚ 2001” (case 14) offers the estimation of WACCs for two competitors and opportunities to reflect upon how business risk drives cost of capital. “Phon-Tech Corp.”
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