Q1) Cohen calculated the WACC to be 8.4%, which we don’t agree. The reasons are as follows: Single/Multiple cost of capital: We think a single cost of capital is sufficient because divisions of Nike have similar risk profiles. Weights: We don’t agree with Cohen’s calculation of book value weights. The weights should be calculated with market value of debt and equity because cost of capital shows how much the investors are willing to pay at present, i.e. at market value.
No tenderness or pain was noted, No drainage, no perforation, no swelling or redness noted of the ear canal, Tympanic membrane is pearly gray, Shinny, translucent, non bulging or retracted. No impacted cerumen noted. Cranial Nerve 8 is intact with no auditory hearing loss. He was able to repeat words (Apple and Base ball). Good response to Rinne and Weber test, sound is symmetrical with no
To calculate the cost of debt we could have used the CAPM, but as it is better to be forward looking, it is preferable to take into account the yield to maturity, the probability of default and the dollar loss in the case of default. We can then write the debt cost of capital as: rD = y - pL In this case Nike’s riskiness of debt can be assumed to be equal to zero. Then pL = 0. The debt cost of capital is thus simply the yield to maturity on a Nike’s bond.
e. Do you expect that those notes will be called or redeemed? a. MSFT is raising money for general corporate purposes, which may include funding for working capital, capital expenditures, repurchases of stock and acquisitions. Also they choose to raise money at this time because the yields for treasury instruments are low, so Microsoft can issue in a lower rate. b. No, because the yields for treasury instruments are very low at the time, so the premium the company will add to their rate is very low, and the investors will get less money for the same level of riskiness, so the paper is not really cheap.
What is the project’s net present value? When attempting to finance a project, it is important to know the financial health of the company. The net present value aids with analyzing the profitability of a project. It demonstrates the difference between the present value of the cash inflows and the cash outflows (Titman, Keown, & Martin, 2011). When a negative net present value is obtained, it is a sure indicator that the firm should not continue to invest in a project.
Capital improvement can save the company on unexpected cost and long-term shut down. Moreover, since Alliance’s customers are sensitive to delivery times, improvement on capital can save Alliance from losing loyal customers as well as their reputation. Other necessary solutions: Renegotiate with the bank In order for Alliance Concrete to finance the additional money for capital investment, they need to present these forecast data to the bank: • The forecast of 2006 leverage ratios: o Debt to prior year EBITDA of 2.67 which is less than the prior year of 2.80 shows that Alliance’s additional finance will not exceed three times the prior year’s EBITDA. o Interest coverage
Intrinsic value is considered important in value investing as it allows Buffett to identify stocks or businesses which are undervalued. This is important as “intrinsic value is the value of a company's business, not its stock” (Carbonara, 1999). How is it estimated? Buffett readily admits that intrinsic value is highly subjective (Bruner et al., 2009). Buffett’s method is to estimate ‘discounted cash flows’ (Carbonara, 1999).
Task 8 part 1 |Ratio |Calculation |Answer for 2009 |Explain how this can this ratio be used to monitor performance | |Current ratio |Current assets/current |6178/1391=0.44:1 |This ratio shows that they are not in a strong position to pay long term debut because they have | | |liabilities | |got less current assets than current liabilities. Tesco can’t pay short term debut which means it | | | | |has weak liquidity. In order to pay of the short debut they would have to have an increase in | | | | |sales or they would have to take out an additional loan, this would be accessible because the bank| | | | |knows that Tesco is a big store and can afford to pay people back. | |Acid Test |(Current assets – stock)/ |6178-2669=3509/1391=0.25:1 |This shows the ability to pay short term debut without selling stock first. The ideal answer for | | |current liabilities | |this ratio is 1:1, Tesco is way under this ideal ratio which means they’re in a poor position to | | | | |pay short term debuts because they have four times as many debuts than they have current assets.
While the invisible hand cannot guarantee efficiency, it is better at guaranteeing equity. ANSWER: F TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxx]. The two broad reasons for a government to intervene in the economy are to promote efficiency and to promote equity. ANSWER: T TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxxi]. Market failure refers to a situation in which the market does not allocate resources efficiently.
A ratio analysis of Wesfarmers shows that it might still have too much debt and could potentially be in a stronger financial position with less debt; however trends show that Wesfarmers are heading in this direction of decreasing debt. Word Count: 1975 The Global Financial Crisis had a profound impact all over the world. Its influence on debt and equity markets had a direct impact on the capital structures of firms. In order to analyse the effect of the GFC on Wesfarmers and whether the company’s capital structure is optimal in the aftermath of the GFC it will be necessary to define how capital structure is measured and the impact that the GFC had on debt and equity market conditions and the industry that Wesfarmers operates in. Eq.