Explore BrainMass
Share

Weighted Average Cost of Capital (WACC)

Discounting unlevered cash flows, cost of debt, WACC

1. Discounting the unlevered after tax cash flows by the __________ minus the ________ yield the __________. a. cost of capital for the unlevered firm; initial investment; adjusted prevent value. b. Cost of equity capital; initial investment; project NPV. c. Weighted cost of capital; fractional equity investment; project NPV.

WACC/Dividend payment/Financial Leverage

1. Calculate the Weighted Average Cost of Capital for the following scenario. Johnson enterprise has a capital structure of 50% bonds, 30% preferred stock, and 20% common equity stock. Their corporate tax rate is 35%. They pay the bond holders 12%. They pay the preferred stock holders 7%. The common stock holders receive 18%. C

Business valuation analysis of the Cheesecake Factory: DCF, FCF, WACC, TV

I do need a financial valuation for the Cheesecake Factory. This is a valuation analysis of the Cheesecake Factory. I do need the: DCF = discount cash flow FCF= free cash flow generated from 2010 until 2015 WACC = weight average cost capital TV = Terminal value on year 2015 The growth rate of Cheesecake factory

Berkshire Instruments: Cost of Capital

To be honest, I don't even know where to start with this problem and would appreciate any help that you feel is allowed. At least something that could get me started and allow me to check my work when finish. Thank you for your help. Please see attachment for the entire problem I need help with... Berkshire Instrument

Cost of capital

Compute Overall WACC, Compute WACC for the three divisions of the company. The Year is 1988. The VP of project management is preparing his annual recommendations for hurdle rates for each of the 3 firms divisions. Investment projects are selected by discounting the appropriate cash flows by the appropriate hurdle rate for eac

Finance question

Fishy Business is a designer and manufacturer of fishing equipment, is contemplating a $300,000 investment into a new production facility. The economic life of the facility is estimated to be five years, after which the facility will be obsolete and have no salvage value. To make the new facility operational, building impr

Locating an Automobile Plant

See attached file. China is a manufacturing superpower. Assume that you are CFO of an automobile manufacturer looking to build a $U.S.800 million plant in China. You are discussing this project with your spouse, who is intelligent, but has no background in finance. 1. Your discussion should begin with a clear and logic

WACC, Corporate Valuation Model, NPV

Which of the following statements is most correct? a. The rate of depreciation will often affect operating cash flows, even though depreciation is not a cash expense. b. Corporations should fully account for sunk costs when making investment decisions. c. Corporations should fully account for opportunity costs whe

Weighted Average Cost of Capital (WACC)

Weighted Average Cost of Capital (WACC) Jenny, the financial vice-president of Leonus Corporation, has been given the task of determining Leonus's WACC. The WACC will be used as the discount rate on capital budgeting projects to find the net present value of the projects. Leonus currently has a bond issue outstanding that Je

Zhdanov Inc. Cash Flow Forecast: What is WACC and Firm's Value?

5. Zhdanov Inc. forecasts that its free cash flow in the coming year, i.e., at t = 1, will be -$10 million, but its FCF at t = 2 will be $20 million. After Year 2, FCF is expected to grow at a constant rate of 4% forever. If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions? a

Divisional Cost of Capital for Diageo's investments

See attached file. 1. Diageo subtracts the value of its portfolio of short-term investments, which is held outside the United States and is not required to support day-to-day operations, from its total debt when calculating its "net debt ratio." Use Diageo's net debt ratio to calculate Diageo's overall WACC. 2. Should Diag

Financial Decison Making

You are considering expanding your line of equipment and apparel for high school athletic teams to include soccer teams. Based on research conducted by the Marketing department, you estimate an increase in sales for your division of $150,000 per year the first two years, then $250,000 per year over the following three years. In

Holt's Model

See attached file. Determine BOTH the WACC and Holt's Valuation for Whole Foods Market Inc's stock. We will be using $0 as the dividend and $26.67 as the recent share price of the stock. Tax rate for the company is 41.5%. Additional company data can be found here: http://www.marketwatch.com/story/10-k-whole-foods-market

Calculation of Firm's Weighted Average Cost

A firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Source of Capital Target Market Proportions Long-term debt 30% Preferred stock 5 Common stock equiTY 65 Debt: The before-tax cost of debt is 9.33%. Preferred S

Miniwave: Weighted Average Cost of Capital (WACC)

Miniwave Corporation is attempting to estimate its weighted average cost of capital and has the following information. Miniwave is a AAA rated corporation. Currently, AAA rated debt is yielding 8% before taxes. Miniwave has a beta of 1.8. The risk-free rate is 6% and the return on the market portfolio is 12%. Miniwave has a targ

Finance: Calculating the Weighted Average Cost of Capital

Royal Petroleum Co. can buy a piece of equipment that can be financed with debt at a cost of 9% and common equity at a cost of 16%. Assume debt and common equity each represent 50% of the firm�s capital structure. Compute the weighted average cost of capital

Calculate Cash Flows, WACC, IRR & Payback Period

Here is the company's balance sheet: Assets: Cash- $2,000,000 Accts. Receivable- $28,000,000 Inventories- $42,000,000 Net Fixed Assets- $133,000,000 Total Assets- $205,000,000 Liabilities: Accts. Payable- $18,000,000 Notes Payable- $40,000,000 Long-Term Debt- $60,000,000 Preferred St

Cost of debt, cost of equity, mixes of both; recommendation

See attached case file. Please help to (1) evaluate the companies cost of debt and cost of equity from a few different perspectives, (2) evaluate different mixes of debt and equity, (3) recommend an amount of debt to equity mix that you think is best for the company and explain why, (4) recommend the weighted average c

WACC (A company has three debt issues outstanding...)

A company has three debt issues outstanding: 1. 7.5% Notes maturing Dec 31, 2018 ($200 million face value), market price $953.75 2. 8% Bonds maturing Dec 31, 2023 ($300 million face value), market price $980.25 3. 8.5% Bonds maturing Dec 31, 2027 ($300 million face value), market price $1,019.71. Use 6.5% risk-free rate and

Calculate the WACC for capital budget for dollars less than $5M

Assume the following: Expected component costs of capital: After tax cost of debt = 6% Cost of preferred stock = 7% Cost of retained earnings = 10% Current mix of market value capital sources: Total debt = $200,000,000 Total preferred stock = 100,000,000 Total common stock = 200,000,000 Total Liabilities and Equity =

Financial Assignment 5

Please see the attached file. (10-1) After- Tax Cost of Debt Calculate the after- tax cost of debt under each of the following conditions: a. Interest rate, 13%; tax rate, 0%. b. Interest rate, 13%; tax rate, 20%. c. Interest rate, 13%; tax rate, 35%. (10-2) After-Tax Cost of Debt LL Incorporated's currently outstan

Issued Preferred Stock or Warrants Including the WACC

You answer the following question: If the firm issued preferred stock or warrants would it include these in the calculation of its WACC? Your answer The firm that issued preferred stock or warrants would only include preferred stock in the calculation of its WACC. Preferred stock has a fixed dividend paid every period fore

Corporate valuation

I need help checking my homework. I am a little confused and need to see if I am heading in the right direction. Thank you Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. Suppose a company's most recent free cash flow (FCF) (i.e., yesterday's fr

ABC wishes to estimate its cost of capital.

The problem: ABC wishes to estimate its cost of capital. The current capital structure is 40% debt, 10% preferred, and 50% common equity. The debt's ytm is 8.3%. Preferred has a par of $70, and 8% dividend, and sells for $76. Beta is 1.05. The risk free rate is 4%, and the market return is 11.4%. The tax rate is 40%. 1)What

Business Finance Questions

Each widget generates contribution margin of $100 ($250 selling price, less $150 variable expenses). The total fixed expenses are $35,000, the break-even point is: A. 250 B. 350 C. 233 D. 140 Each widget the selling price is $2, and the variable cost per unit $1.60. The total fixed expenses are $12,000, the bre

Accounting Assistance Requested for Studies

Please see the attached questions that I need assistance with. 1. Carry & Co. is in the process of analyzing its investment decision-making procedures. The two projects evaluated by the firm during the past months were Project 263 and 264. The basis variables surrounding each project analysis, using the IRR decision technique,

Finance: Compute Jersey Computer's optimal capital structure

Jersey Computer Company has estimated the costs of debt and equity capital (with bankruptcy and agency costs) for various proportions of debt in its capital structure: Proportion of Debt After-tax Cost Debt, ki After-tax Cost ofEquity, ke 0.00