Financial Management Agenda 1. What is the WACC and why is it important to estimate a firm’s cost of capital? Do you agree with Joanna Cohen’s WACC calculation? Why or why not? 2. If you do not agree with Cohen’s analysis‚ calculate your own WACC for Nike and justify your assumptions. 3. Calculate the costs of equity using CAPM‚ the dividend discount model‚ and the earnings capitalization ratio. What are the advantages and disadvantages of each method? 4. What should Kimi Ford recommend regarding
Premium Arithmetic mean Weighted average cost of capital Average
Marriot Case Marriot use the Weighted Average Cost of Capital to estimate the cost of capital for the corporation as a whole and for each division‚ and the hurdle rate is updated annually.(WACC = (1-Tc) * (D/A) * R[D] + (E/A) * R[E]) Marriot’s Tax Bracket = 175.9/398.9 = 44% Division’s asset weight to the corporation: Lodging = 2777.4/4582.7 = 0.59 Contract = 1237.7/4582.7 = 0.28 Restaurant = 567.6/4582.7 = 0.13 Risk free rate is 30 years T-Bond = 8.95% (Lodging use long-term debt)
Premium Weighted average cost of capital Economics Finance
0.28 0.48 0.42 Target D/D+S Target D/S Levered Beta 74% 2.85 1.62 Costs of Equity: Rf Lodging MRP 8.95% 7.43% Beta Requity 1.62 21.02% Costs of Debt: Rf Lodging 8.95% Spread Tax rate Rdebt(1-T) 1.10% 0.44 0.0563 WACCs: Lodging Target D/D+S Rdebt(1-T) S/D+S Requity WACC 74% 0.0563 26% 21.02% 9.63% Page 1 Sales Weighted Levered Beta 1.56
Premium Progressive tax
Risk – Free Rate 3% + Beta Coefficient .36 Market Risk Premium 8% Cost of Equity 5.88% + Risk - Free Rate 3.% Weighted Cost of Equity 3.52% X Percentage of Total Capital Supplied by Equity 60% + Before Tax Cost of Debt 5.66% WACC 5..00% Weighted Cost of Debt 1.53% Before Tax Operating Profit in % 100% After Tax Cost of Debt 3.83% X X After Tax Operating Profit in 67.6% 40% of Total Capital Supplied by Debt 40% - Income Tax Rate 32.4% Rate of Return of
Premium
buybacks and strong dividends. About 43.8% of the total capital of the company comes from debt and the remaining comes from equity. The cost of the different components of its capital structure are – debt: 2.92% (after-tax cost)‚ and equity: 9.49%. The WACC is 6.61%‚ based on the capital structure outlined. The effective tax rate is 35.4%. AT&T has had dividend growth for the last 25 years. The dividend growth this year was 2.5% and the last year was 12.7%. Dividends declared totalled $1.61 per share
Premium Stock Generally Accepted Accounting Principles Balance sheet
Case 13: The Timken Company Student Presentations – November 15‚ 2011 Participating groups: Sections 1 and 2 Section 1 Presentation groups Group 11 Group 12 Questioning groups Group 5 Group 13 Evaluating Groups Group 10 Group 1 Deadline for electronic submission of presentation slides and case reports Nov 14‚ 1:00 pm Deadline for electronic submission of questions Nov 15‚ 8:00 am Section 2 Presentation groups Group 11 Group 12 Questioning groups Group 5 Group 6 Evaluating Groups Group 10 Group
Premium English-language films Student Time
Contents Introduction "Workforce planning is about having the right talent with the right skills‚ at the right time and cost‚ to support the organization’s strategy. Workforce planning is a strategic response to changes in workforce demographics‚ business models and economic conditions – and in today’s environment‚ it’s more important than ever.” - Watson Wyatt Telecom’s industry is evolving at breakneck speed and the demands of the customer are forcing
Premium Human resource management Human resources
Timken Art Museum Of the many art museums in San Diego‚ California‚ I decided to visit the Timken Museum. It is located in Balboa Park. My trip to the museum was great. There were many events going on. Instead of the trip being boring and plain‚ it was cheerful and fun. The Timken Museum was very nice and had many great works of art. While being there‚ everyone got to individually look at the pieces of art. It was not a tour like how you usually see in movies. I got to look at each painting for
Premium
Reasons for acquisitions Companies follow acquisition strategies for a variety of reasons‚ including: 1) Increased Market Power A primary reason for acquisitions is that they enable companies to gain greater market power. While a number of companies may feel that they have an internal core competence‚ they may be unable to exploit their resources and capabilities because of a lack of size. A company may be able to gain the size necessary to exploit its core competence by becoming larger
Premium Barriers to entry Coffee New product development
PRESENTATION TOPIC: MERGERS AND ACQUISITIONS‚ MODERN THEORY OF CORPORATE CONTROL COURSE INSTRUCTOR: MIRIE MWANGI GROUP MEMBERS: STUDENT | REGISTRATION NUMBER | BANCY WANGUI | D61/60453/2011 | ISAAC NYAMORA | D61/66960/2011 | JACQUELYNE M. ODERO | D61/62818/2010 | JOSEPHINE M. ODERA | D61/63410/2010 | MATTHEWS WAUYE | D61/63904/2010 | SAMUEL GATHUA | D61/64121/2011 | TIM SILOMA | D61/60464/2011 | ABSTRACT In today’s globalised economy‚ mergers and acquisitions (M&A) are being increasingly
Premium Mergers and acquisitions