WACC Essay

There are two variants of the DCF valuation: the equity valuation and the firm valuation. In fact, we can either use the free cash flow to the firm (FCFF), which is the after-tax cash flow that accrues from the firm's operations, net of investments in capital and net working capital, or we can use the free cash flow to equity (FCFE) that is the cash remaining after a firm meets all of its debt obligations and provides for necessary capital expenditure. Discounting the FCFF at the cost of capital…

1. Is mercury an appropriate target for AGI? Why or why not? Please clearly cite examples for your reasons. (10 points) There are many reasons that mercury is an appropriate target for AGI. • Both companies are in the same industry of footwear products. • First off the two companies have differentiating strategies and markets that they sell to. AGI will be adding a new market to their company goals and increasing their revenue streams. • AGI strives in the casual footwear segment with a…

Introduction The need for relevant information and analysis of capital budgeting alternatives has inspired the evolution of a series of models to assist firms in making the "best" allocation of resources. Capital budgeting is determining how much “the firm pay to finance its operations using debt and equity sources?” (Coo, 2024, p. 373). It helps the company decide which projects will be profitable and when a return can be expected. Adjusted Present Value (APV) and Net Present Value (NPV) Net…

Earlier this spring, I interned with KPMG on their business valuations team. This team focuses on the intangible assets and overall value of a company. There is another team that focuses on the tangible assets of the company. These teams work closely together. There are many reasons for a company to be valued - tax reporting purposes, restructuring (including mergers and acquisitions), audit assist, and litigation support. I had the opportunity to work on three major projects for three separate…

has 0.547 in D/E ratio, and Broadway 0.18. Under these two scenarios, I assume Broadway will go more aggressive there fore I would to pick 0.547 as target ratio after acquisition, and then assume Broadway Credit level Baa, and then we will have our WACC which is 8.52%. Positive present value indicates that the next eight years following the merger, the company will be able to meet and surpass its costs. Individually Broadways Industries would have a net present value of $119.02, while Landmark…

To begin with, it is a vital role in determining the most appropriate capital structure for a business organization. One of the main reasons is to maximize shareholder wealth which has been the main priority. Besides that, the decision made on the type of capital structure to be applied can also impact the company itself in dealing with its competitive environment. Based on Modigliani and Miller (1958), optimal capital structure exists when risk of bankruptcy is balanced with the savings of debt…

2013 2012 221.2/ (7274.8- 737.5- 1853.6- 2066.1) 193.4/ (7250.1- 439.1- 1604.7- 2222.3) € 0.0540m € 0.0648m ROIC gives investors a good idea of how well management is putting their borrowed funds to work. The greater the spread between ROIC and WACC, the better position the company is in to create wealth and add value. In the case of Coca Cola, the ROIC seems to have decreased from 2012 – 2013 by 0.0108m€ which is a negative aspect for the company Leverage ratios CCHBC’s ability to meet its…

cross-border business is also growing, although the competition in this subsector is quite fierce. Valuations Trading at around 20x f12m P/E, valuation is low compared to its own historical and international comps. A DCF valuation with assumptions of 12% WACC, 40%, 35%, 30%, 25% and 20% revenue growth in 2016-2020, 3% terminal growth afterwards and capex from the management guidance is around $16-18. Potential Catalyst Vipshop is going to release its 4Q15 results in late Feb or early Mar.…

WACC demonstrates the riskiness of the firm in a percentage along with how much weight there is between debt, equity, and the tax rate. Calgon is outperforming the other two companies, meaning that Calgon is less risky than the other two companies Based…

Note that there is a difference between UFCF defined above and what are referred to as “free cash flows” in Exhibit 13 (on line 14)? • Discount Rates. As we mentioned when discussing the Marriott case, the choice of discount rates is an important part of any valuation procedure. It is worthwhile to spend some time thinking carefully about these issues. – Congoleum’s equity beta is known (see Exhibit 9). Do you need to rely on comparable companies’ data to obtain Congoleum’s asset beta? – For the…