Weighted average cost of capital

the long-run, only normal profits will be achieved as shown in Appendix 2. The reasoning behind this is if supernormal profits are being acquired in the short-run it will incentivise firms to enter the market who will compete for profits by lowering costs until there are no supernormal profits to be earned, i.e. when the firm breaks even. In the short-run, there are a fixed number of firms and a monopolistically competitive firm maximizes profit or minimizes losses by producing the quantity…

Thailand, do you think its cost of capital will be greater or lower than its cost of capital when operating solely in the US? Explain your answer. Sports Experts’ cost of capital will probably be greater than the cost of capital of sport shoes manufacturers operating in the U.S. because of Sports Experts’ expansion into Thailand. Typically, an MNC has access to international capital markets, and international diversification are advantageous to an MNC’s cost of capital. Nevertheless, Sports…

required to calculate the Weighted Average Cost of Capital (WACC) of Bintulu Port Holdings Berhad. Weighted average cost of capital (WACC) is the average rate of return a company expects to compensate all its different investors. The weights are the fraction of each financing source in the company's target capital structure. Based on the company we have chosen, Bintulu Port Holdings Berhad, the cost of the equity of the company is 1.04%, while the cost of debt is 4.62%. Capital structure weights…

paper. This paper is going to address about different types of inventory valuation methods that has been used to compute the cost of goods sold under perpetual system, FIFO and LIFO cost flow, periodic system, FIFO and LIFO cost flow, weighted average cost, and moving average cost flow. Periodic System, FIFO cost flow The companies with inventory items of small unit cost update its inventory records at the end of an accounting…

free cash flows will be reduced by $1,000,000 for each of the first two years of the contract, which starts today, and free cash flows will be increased by $3,000,000 for each of the final six years of the agreement. Boilermaker has a weighted average cost of capital of 9%. There are currently 3,700,000 shares of Boilermaker outstanding, and the current price is $46.73 per share. What effect should this announcement have on the price of a share of…

of the company and the factor behind it, showing the key drive of it. Introducing the weighted-average cost of capital (WACC) importance and how to manage the cost of capital by the management team. Economic value added (EVA) its use as indicator, internal…

EBITDA margin is relatively lower than its peers and the net profit margin is slightly higher than the average of the peer group (14.09%). (Appendix) Key risks that the investors must look out include strategic risks such as high sales exposure to Avago, decline in consumer spending, cost of optoelectronic-based products and operational risks like delay in capacity expansion, accelerated average selling price (ASP) erosion, wafer shortage issue as well as financial risks such as foreign exchange…

analyze the sensibility of cost of debt and capital structure: We have chosen the cost of debt because that different methods could be used to calculate this variable. The cost of debt referencing the debt rating of CCC+ had be used for the calculation above with a value of 10.26%. If we use the method of CAPM which is not very often using for the computation, we would find 4.1%, which is significantly smaller than 10.26%. Therefore, a sensibility analysis with 3 different cost of debt (4.1%,…

weights, we then moved onto finding the cost for each sources of capital. To find the cost of debt we used two different methods. For the private corporate public bonds, we used the matching method. We found that Dr Pepper and Snapple Group Incorporated’s, long-term debt rating was a BBB+. We then matched it to the best fit from the average yield of US corporate bonds by maturity and rating table. For the public bonds, we used Yield to Maturity to calculate their costs, using the excel function…

zero (0). That is, the future cash flows of the investment plan equal the initial capital outlay of the project. The technique analyzes an investment plan by comparing the yield on investment to the minimum hurdle rate of a company. Like the NPV method, internal rate of return also puts into consideration the time value of money, where it discounts the future inflows. The procedure relies on the initial cost of the capital that the firm may incur when undertaking a project and the cash proceeds…