Essay on Weighted Average Cost of Capital and Marriott Corporation
1. Why does Mr. Butler have to borrow so much money to support this profitable business?
2. Do you agree with his estimate of the company’s loan requirements? How much will he need to borrow to finance his expected expansion in sales (assume a 1991 sales volume of $3.6 million)
3. As Mr. Butler’s financial adviser, would you urge him to go ahead with, or to reconsider, his anticipated expansion and his plans for additional debt financing? As the banker, would you approve Mr. Butler’s loan request, and, if so, what conditions would you put on the loan?
1. What factors could Mr. McClintock consider in deciding whether or not to adopt the level production plan?
2. What savings would be …show more content…
1. Was Compania de Telefonos de Chile (CTC) helped or hindered by the Bond Group’s ownership after privatization? In light of the competing offers by other interested buyers, did it make sense for Chile to have selected Bond Group’s bid at the time of privatization?
2. What are CTC’s external funding needs for the next three years? The next seven? What are its most viable sources of financing over the same period?
3. What is an American Depository Receipt (ADR)? In general, why might U.S. investors wish to own an ADR?
4. How effectively can the U.S. ADR market meet CTC’s financing needs for the next three to five years? How attractive would CTC’s ADRs be for an American investor?
5. As Sr. Garcia, what financing strategy would you propose for CTC? What would be your first step in implementing that strategy?
1. What is the valuation problem here? In what currency are the cash flows denominated? In what currency should the discount rate be denominated? Be sure you understand Exhibits 1, 2, 3, and 4 of the case.
2. In this case, why doesn’t J.P. Morgan discount local cash flows at a local required rate of return? In fact, why not use that approach generally?
3. To complete the estimation of a required rate of return, what other effects should we incorporate into our standard weighted average cost of capital (WACC) and capital asset pricing model formulas?
4. Please estimate