The Weighted Average Cost of Capital is the average of the costs of a company's sources of financing-debt and equity, each of which is weighted by its respective use in the given situation. By taking a weighted average, it shows how much interest the company has to pay for every marginal dollar it finances. A firm's WACC is the overall required return on the firm as a whole and, it is often used internally by company directors to determine the economic feasibility of expansionary opportunities and mergers. Also, WACC is the appropriate discount rate to use in stock valuation. No, I don’t agree with Cohen’s WACC calculation.
CCompany Financial Analysis In doing the company financials a couple of key things become apparent. One of the biggest factors in the financials is the consistency in Costco’s growth over the past four years. The four profit margins (Total Revenues, operating income, net profit margin, and Diluted net income per share) have for the most part been rising for the last four years. Costco may look like it’s not growing but having these constant margins along with the growth in revenues means that the profit (bottom line) for Costco is increasing. Costco is doing great job in making sure that revenues constantly grow as shown below while maintaining a proportional amount of expenses to keep the profits the same or a little high from the previous year.
In 1993, the company had a19.92% on return on total capital and by 1994 it had increased to 21.36%. After that, it increase on ROTC it has been steady. Overall Tire City has proven with a solid sales growth throughout the years its success, the company sales improved from $16,230,000 in 1993 to $20,355,000 in 1994 with a favorable change of $4,125,000 or 25.24% in sales in 1994 and 15.5% sales in 1995. I found this percentage by using the four-figure standard protocol in sales. With the profitability ratios of the company we can see that the company’s performance is doing well during the last few years.
C] Comment on Circuit City's capital structure decision [including debt, equity, securitization and leasing] versus Best Buy. D] Identify the distortions to Cash Flow from Operations due to off-balance sheet financing. E] Build a simple EXCEL model with VLOOKUP to run a synthetic debt rating for Interest Coverage [EBIT/Interest] and Leverage [Debt/Debt + Minority Interest + Equity] Circuit City Stores Case Barry M Frohlinger copyright 2003 www.learnfrombarry.com 2 Circuit City Stores, Inc. was incorporated in 1949. Its retail operations consist of Circuit City Superstores, Circuit City electronics-only stores and mall-based Circuit City Express stores. Certain of Circuit City Stores, Inc. subsidiaries operate CarMax Auto Superstores, a used-and new-car retail business.
More than that, KFT has been making good progress in capturing the synergies from the Cadbury acquisition. 2- Revenues in this quarter raised 11.1% to $12.5 billion, at the same time organic growth was 4.6% directed by a solid top line growth in all regions. Pricing accounted for 3.7 percentage points of growth and volume and mix contributed 0.9 percentage points. However, Easter-related shipments partially offset the growth by 1.5 percentage points. Revenue grew with the developing markets leading the race in each of the geographies with an increase in revenue of 24%.
If historic trends are any indication of future performance, Costco must react proactively and remedy this matter immediately. Conversely, the foreign markets are heading in the opposite direction. Costco’s sales data indicates positive sales growth outside of North America. The company’s most profitable stores are in Korea and Taiwan. Between 2004 and 2009, Costco’s sales in Taiwan’s $72 billion retailing market have tripled.
It has drastically increased the marketing capabilities for local businesses while reducing costs for the consumer. The consumer now has the opportunity to get involved in new activities with reduced risk. Groupon’s success is partially due to their knowledge of consumer behavior. In 2008, Goupon had 400 subscribers in Chicago. Now, they have 60 million subscribers in 40 countries today making them the fastest growing company in the world.
Coinstar, Inc. – Analysis of an Automated Retail Trailblazer Ranked 15th in Fortune’s Fastest-Growing Companies for 2012, Coinstar continues to ride a wave of success through its innovative self-service automated retail solutions. The company has experienced exponential growth with revenue increases of 39% and 29% in 2010 and 2011 respectively. This growth can be attributed to a growing number of kiosk installations, existing kiosk sales growth, and a continued effort to expand automated retail sales enterprises (Cacace, 2012).
To address these challenges P&G respond to competitive factors, including pricing, promotion and innovations. So far, the company managed to be number one in the industry and has all the potential to remain on top in the coming years. Summary of the 2010 results: * Net sales increased 3% to $78.9 billion: * Organic sales increased 3%; * Unite volume increased 4%. * Net earnings decreased 5% to $ 12.7 billion. * Diluted earnings per share declined 4% to 4.11.
In the opening case, Hyundai and its affiliate Kia are the fast-growing carmakers in Korea because they have benefited from export-led growth. Hyundai sells 60 percent and Kia 80 percent of production in foreign markets, particularly the United States, where they have been gaining share recently. Hyundai and Kia use the foreign exchange market to convert the dollars it earns from selling cars in the United States into Korean won. Therefore, facing by the strong dollar against the weak won, Hyundai and Kia can price their cars below the prices of both domestic firms and the major Japanese companies, such as Toyota and Honda in the United States and European Union. Hyundai and Kia can use this low-price strategy to increase the foreign sales and earn the profit.