Return on Capital Employed Review of the NZ Listed Sector May 2012 Return on Capital Employed Contents 1. Opening Comment 2. Executive Summary 3. Return on Capital Employed Explained 4. Discussion of Results 5. Background on Armillary Private Capital 6. Sources of Data Appendix 1 – Detailed Results 2 3 5 12 23 23 24 2012 Disclaimer The information contained in this report has been prepared by Armillary Private Capital (’Armillary’). While the intention is to provide accurate information
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Application of Capital Structure‚ Costs of Capital for Multiple Division firms Case Analysis: Pioneer Petroleum Corporation (PPC).1 Submitted by: Joseph Donato N. Pangilinan‚ FICD Date Presented: April 12‚ 2012 Introduction: This landmark case seeks to break the risk-reward trade off involved in calculating Capital Cost. The object of the solution must be to minimize project risks while maximizing project opportunities available. We want a rate and a rating system that does not unnecessarily
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Wrigley Jr‚ Company Capital Structure Wm. Wrigley Jr‚ Company Capital Structure 8/23/2013 8/23/2013 EFB340 Finance Capstone Case Study 1 Group S3 Dat Bui (N8360928) JeongHwan KWON (N8400822) Honghu Ye (N8106258) EFB340 Finance Capstone Case Study 1 Group S3 Dat Bui (N8360928) JeongHwan KWON (N8400822) Honghu Ye (N8106258) Table of Contents Abstract1 1.0 Introduction2 2.0 Analysis Share price2 Weighted Average Cost of Capital2 Earnings
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1. How are Mortensen’s estimates of Midland’s cost of capital used? How‚ if at all‚ should these anticipated uses affect the calculations? Mortensen’s cost of capital estimates are used for a variety of purposes at both the divisional and corporate levels. Examples include internal analyses such as financial accounting‚ performance assessment and capital budgeting‚ while others are used for strategic planning purposes such as merger and acquisition‚ as well as stock repurchase decisions (Luehrman
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CHAPTER 13: CAPITAL STRUCTURE AND LEVERAGE 1. A firm’s business risk is largely determined by the financial characteristics of its industry‚ especially by the amount of debt the average firm in the industry uses. a. True b. False ANSWER: False 2. Financial risk refers to the extra risk borne by stockholders as a result of a firm’s use of debt as compared with their risk if the firm had used no debt. a. True b. False ANSWER: True 3. A firm’s capital structure does not affect its free cash
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High capital required 2. Slow product process * Opportunity: 1. Highly required in military 2. Increase goodwill of the company * Threat: 1. Limited business area 2. High product quality required(high responsibility for products) 3. Legal issues Weighted Average Cost of Capital Analysis (WACC): In this case‚ we use WACC as the required rate of return to calculate the company’s net present value. The CAPM theory is being used here to find the cost of equity
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Managerial Finance – Problem Review Set – Capital Structure and Leverage 1) If a firm utilizes debt financing‚ an X% decline in earnings before interest and taxes (EBIT) will result in a decline in earnings per share that is larger than X. a. True b. False 2) Firm A has a higher degree of business risk than Firm B. Firm A can offset this by using less financial leverage. Therefore‚ the variability of both firms ’ expected EBITs could
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CHAPTER 16 FINANCIAL LEVERAGE AND CAPITAL STRUCTURE POLICY Answers to Concepts Review and Critical Thinking Questions 1. Business risk is the equity risk arising from the nature of the firm’s operating activity‚ and is directly related to the systematic risk of the firm’s assets. Financial risk is the equity risk that is due entirely to the firm’s chosen capital structure. As financial leverage‚ or the use of debt financing‚ increases‚ so does financial risk and‚ hence‚ the overall
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value-creating projects‚ achieve an optimal capital structure‚ and repurchase undervalued shares. To accomplish these goals‚ Midland must calculate an appropriate cost of capital that will allow reasonable valuations of their strategies. In funding overseas growth‚ Midland must use its cost of capital to analyze‚ evaluate‚ and convert foreign cash flows. In evaluating value-adding projects‚ the cost of capital must be used to discount project cash flows. To optimize its capital structure‚ the company must continuously
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A company’s capital structure is a very important component of a company’s financial health and longevity. The capital structure should maximize total net profit and overall shareholder wealth. An optimal proportion of equity and debt as a company’s capital structure is an indication of a well-managed and successful company and should be a goal for most corporations. Beverly Flax and Rick Rosenfield founded California Pizza Kitchen (CPK) in 1985 in Beverly Hills‚ California. It is a casual dining
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