Preferred stock

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 Mobil Corporation and XTO Energy Inc. Announce Agreement | ExxonMobil News Releases,”…

Capital Structure I will discuss the stock and capital structure of Oracle Corporation used to grow the corporation worldwide and strengthen research and development efforts. Corporations raise capital by issuing common and preferred stock, by exchanging an ownership stake and sharing profits with investors. The corporation experienced significant growth since the inception growing to over a $30B in recent years. Publicly traded corporations have risk associated with the stock price in relation…

cash flow stream; and (3) riskiness of the cash flows. F. What is free cash flow? A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it is tough to develop new products,…

the issuing of either stocks or bonds , as well as, borrowing funds from traditional financial institutions. In order to procure the necessary funding that a new business venture requires, one must evaluate whether to borrow the funds or whether to sell a portion of the business interest or ownership to potential equity investors…

valuing the future projects as well as the company as a whole. The asset beta method is a version of using the widely accepted CAPM (capital asset pricing model), substituting in asset beta for the firm’s beta. By using asset beta, financial effects from leverage are eliminated. As a result, using equity beta removes any beneficial effects gained from adding debt to the capital structure, giving investors a better idea of how much risk they are actually taking on when investing. The first step…

$3.0 million d. What was the company’s operating cash flow? $4.0 million e. If operating capital in the previous year was $24 million, what was the company’s free cash flow (FCF) for the year? $2.0 million f. What was the company’s economic value added? $500,000 2. As an institutional investor paying a marginal tax rate of 46%, your after-tax dividend yield on preferred stock with a 16% before-tax…

between debt and cost of equity capital in the case of corporate tax benefits. Their findings suggest that, “the corporate tax benefit reduces the leverage-related risk premium demanded by equity investors” (Dhaliwal, et al., 2006, p. 718). 3.2 Agency Cost In the finance world, agency costs are the conflicting interests among shareholders, bondholders, and managers. How does this affect the capital structure? It is best to illustrate this with a simple example. The owner of the company that is…

past 4 weeks. However, the stock has corrected -1.26% in the past 1 week, providing a good buying opportunity on dips. On a relative basis, the stock has outperformed the S&P 500 by 2% in the past 4 weeks, but has underperformed the S&P 500 in the past 1 week. Netscout Systems (NASDAQ: NTCT) During the past 4 weeks, traders have been relatively bearish on Netscout Systems, hence the stock is down -2.84% when compared to the S&P 500 during the same period. However, in the past 1 week, the…

b) Why is company B’s ROE so much higher than company A’s? Does this mean that company B is a better company? Why or why not? c) If companies A and B were combined (merged), what would be the impact on the results on ROE? Under what conditions would such a combination make sense? d) What is the net income during the project period? e) Compute the net cash flow from the project during the first year. Problem # 3 [16]: Table 3 summarizes the financial conditions for Apple…

2013. Current assets have increased between the two years by only $1,284 million and current liabilities by a mere $2,223. Which for a large retail such as Myer is low and inefficient. Even though the statistics have slightly varied between the two years the current ratio has not changed, leaving it to still be an unfortunate 0.9:1. For Myers to have a positive ratio they must be able to achieve a current ratio of 2:1. The reports for 2013 and 2014 leave them with a negative current ratio…