Which assumptions are implicit in the WACC method and are they satisfied for Nike? No, disagree. * Weights of Equity and Debt: Joanna uses the book value rather than market value of equity to calculate weight; however, she should have used the market value of equity. Using the book value of debt rather than market value is considered acceptable, since normally there is no big difference between book value and market value of debt. * Cost of Equity: * Beta: she used the average beta of the last 5 years, which is also acceptable.
2. If you do not agree with Cohen’s analysis, calculate your own WACC for Nike and be prepared to justify your assumptions. * * I calculated the cost of debt differently by calculating the yield to maturity then taking the tax out of that. * For cost of equity I agreed with how she calculated it with using the geometric mean instead of the arithmetic mean, the risk free rate using the 20 year treasury rate, and an average beta * The weights of equity and debt I calculated differently. For equity I took the number of shares outstanding times the stock price to get 11503.2 million.
| HOW THE STOCK HAS FARED: Stock performance between the day before P&G announced acquisition of Gillette on Jan. 28, 2005 and market close on Feb. 11, 2010. | Five years later, though, things haven't exactly gone as planned. Most of the acquired Gillette businesses have been a drag on P&G's top line, not a boost. Most of Gillette's senior managers (with the notable exception of current P&G Vice Chairman Ed Shirley) have left. P&G's stock has lagged behind key competitors', including Colgate-Palmolive Co. and Unilever, which have beaten P&G 4 to 1 and 3 to 1, respectively, in the stock market.
Refer to situation anaylsis 2. Internal Marketing Audit Operating Results Total group sales have reduced by £225.9m to £923.2m, plus a 12.1 decline in sales. “An adverse movement in the Hong Kong dollar, offset by favourable movements in the Euro and Singapore dollar, impacted sales by £0.4m and operating profit by £nil.”(HMVgroup, 2012). Sales lessened from £1,102.2m to £873.1m and the costs afore tax and special items were £16.2m, which is down from a profit of £16.2m in the previous period. Furthermore, significant charges of withdrawn operation of £33.5m were sustained in the year.
Less than 1% were left available Porsche announced that they had accumulated a 74.1% stake in Volkswagen on October 26, 2008. This caused chaos in financial markets around the world because the German state of Lower Saxony held a 20% interest in Volkswagen, and DAX index funds held an additional 5% of Volkswagen shares. These three groups accounted for 99.1% of outstanding Volkswagen shares. This left only 0.9% of Volkswagen shares available on the open market. Unfortunately, investors around the world expected that the value of Volkswagen would decline given the state of the world economy in 2008, and these Investors had short sold 12.8% of Volkswagen shares.
With local operations in over 200 countries around the world. Debt Ratio (in Millions of Dollars) 2013 2012 Total Liabilities / 1,085 1,148 Total Assets 1,276 1,283 Debt Ratio 83.50% 89.48% The ratio shows the company’s ability to cover its debts through its total assets. The ratio was 89.48% in 2012, then went down in 2013 to 83.50%. The ratio has to be low. So we can interpret that in the year 2013, the risk of the firm is getting lower as the ratio goes down.
Procter & Gamble Case Analysis Financial Stagnation: In this case study, Procter & Gamble (P&G) has experienced disappointing financial reports for the year 1999-2000. Profits, excluding reorganisation costs, grew by only 2 %, to $4.23bn, and it’s flagship brands endured disappointing growth, causing the company to scale back its growth forecasts. (Jones, 2001) P&G has responded in two ways. Firstly, it has acquired Clairol, the shampoo and hair-colouring business, for $4.95bn. This led to a 4% drop in share prices.
Total losses for the four days: $30 billion, 10 times federal budget and more than the U.S. had spent in World War I ($32B estimated). The crash wiped out 40 percent of the paper value of common stock. Although this was a cataclysmic blow, most scholars do not believe that the stock market crash, alone, was sufficient to have caused the Great Depression. And the next possible cause is bank failure.In 1929, there were 25,568 banks in the United States; by 1933, there were only 14,771. Personal and corporate savings dropped from $15.3 billion in 1929 to $2.3 billion in 1933.
The firms stock has declined $2 per share over the last nine months but the firms profits have been rising. Shareholders normally receive what is called cash dividends and from the text the firm has never paid a dividend in 20 years. From what is written in the first paragraph, shareholders wealth is reducing during this time, and this shows that there is an agency problem. With the management team their actions show that pollution controls will show a profit maximization try, which means the managers are trying to maximize his or her salary, instead of the attempt to maximize shareholders wealth, the stock price. Evaluate the firms approach to pollution control.
The policy of reducing debt made MC leave the company with just $36 million cash which was well under the number of 1990 ($283 million cash ). MC’s stock prices fell more than two-thirds from $33.38 in 1989 to $10.50 in 1990, resulting in a drop of $2 billion in market capitalization; even if in 1991 it went up to $16.50. Another consequence was an important decrease of Times interest earned from 2.6 in 1989 to 1.4 in 1990 and 1.5 in 1991 which triggered a depreciation of bond rating from A3 in 1989 to Baa3 in 1991 quite close to junk bonds. For the future this is a strong signal of the MC financial crisis situation. Most liquidity and solvency indicators show that the group would have not been unable to cover its current obligations/liabilities and was close to bankruptcy.