WACC Essay

286). There are various benefits to using WACC including any interest payments associated with the debt is tax-deductible (Beech & Thayser, 2015, pg. 30). However, When ExxonMobil acquired XTO Energy in 2009 for $41 billion, it was acquired by a combination of preferred stock and common stock (“Exxon…

Company Overview: The Dr. Pepper Snapple group was founded in 2009 and was formed when Cadbury Schweppes demerged its beverage section in 2007 from the company. This allowed the Dr. Pepper Snapple Group to go public and begin growing as its own entity offering an IPO of $25.80. Currently the company holds rights to concession stands throughout the National Hockey League, they also are owners of Dallas Stars home arena in Frisco, Texas. In 2009 the Dr. Pepper Snapple group purchased a majority…

NPV can be calculated, but is only relevant when both projects have the same WACC value. The larger the WACC value used (when all cash flows are negative), the less negative a project’s NPV becomes (which is wrong). (C) Risk Analysis in Capital Budgeting Risk is an important consideration in the capital budgeting process. Firms should be concerned…

Kenkel, Kerins, Kruse, Seifert 1 I. Introduction Kimi Ford, a portfolio manager at NorthPoint Group, was reviewing the financials of Nike Inc. to consider buying shares for the fund she managed, the NorthPoint Large-Cap Fund. A week before Kimi Ford began her research, Nike Inc. held an analysts’ meeting to reveal their 2001 fiscal results and for management to communicate a strategy to revitalize the company. Nike’s revenues since 1997 had ceased to grow from $9.0 billion, and net income had…

Calaveras Vineyards Case Study Lionell C. Henderson Northwood University MBA 634 Measurement II (Evening) Adam Guerrero, PhD OUTLINE Introduction Executive Summary Analysis…

Furthermore, by sponsoring the program, Pacific Grove will have a positive NPV with an IRR of 41.28% (Exhibit 3). The initial investment to sponsor the program will be $1,440,000 and other maintenance expenses in future years. However, by using the lowest WACC of 10%, the project produces an NPV of $3,278,174, which makes it profitable. Also, higher WACC's of 20% and 30% produce positive NPV and increase cash flows for Pacific Grove (Exhibit…

3 The cost of Equity Capital represents the expected return of equity investors. The WACC is measured by taking the weight of debt outstanding and multiplying it by the cost of debt and the tax shield, then adding to that the weight of equity and multiplying that by the cost of equity, as shown in the following equation: Equation 1: [D/V*(Rd)*(1-T)+E/B*(Rd)] As the WACC holds true, the increased weight in the lower cost of debt along with the additional tax shield and the decrease…

the stable growth afterwards. Hence, the first stage of this model would be the increasing phase for 5 years and then followed by the stable growth phase. 5.2. Valuation Input Weighted Average Cost of Capital (WACC) would serve as one of the valuation input for this two-stage DCF model. WACC itself explain…

is able to determine if the company should purchase new equipment to increase the company’s printing capabilities. Additionally, capital budgeting occurs in three steps, finding the required rate of return via the weighted average cost of capital (WACC), calculating relevant cash flows, and analyzing the cash flows through capital budgeting tools such as the net present value (NPV) and internal rate of return (IRR) (Colorado State University-Global Campus, 2017). Once these steps are…

computational formula of equity value per ordinary share by the following equation: We applied for the relevant data of free cash flow from the UBS analyst report(2013) around the IPO date. And also use the ratios on the weighted average cost of capital(WACC) and terminal growth rate is 8.3% and 0.5% respectively. Additionally, we applied for the amount of average diluted shares of 1,000m. Therefore, in the end, we use DCF model to replicate the offer price and this yields an equity value per…