Weighted average cost of capital

WACC gives the cost of this capital raised by putting appropriate weights on the cost of equity and the cost of debt R_E=R_f+〖(R〗_m-R_f)*β_M R_f=risk free rate (govt. security bonds) R_m-R_f=risk premium β_M=systematic risk (regression of stock returns of company on market return) The cost of equity is calculated via capital asset pricing model. Cost of debt is calculated by taking the interest rate for the year 2013 as Interest/EBIT…

Rio Tinto is a leading global mining and metals group that focuses on finding, mining, processing and marketing the Earth’s mineral resources. (Anon., 2016) Rio Tinto plc/ Rio Tinto limited are listed in London and New York Exchange list as well as in Australian Security Exchange. Rio Tinto operates in more than 40 countries and employs more than 55000 employees across all operations -open pits, underground mines, mills, refineries, smelters, power stations, and various research and service…

Alternative B Investment costs NPV Base case -320,000 -30,130.72 Worst case -368,000 -67,661.15 Best case -272,000 7,399.71 Even in the best case situation, the NPV for Alternative B is barely positive. It will be very difficult to achieve a positive gain if the company should proceed and further analysis into the probability of the Best Case occurring could be warranted. Alternative B Changing the cash flows by ±40% and keeping the initial investment…

into two parts; the theoretical part and the empirical part. Section 2.1 reviews the theoretical literature and section 2.2 will provide an insight on the various empirical literatures of the CAPM and the APT. 2.1 Theoretical literature review The Capital Asset Pricing Model (CAPM) was formulated by Sharpe (1964) as well as Lintner (1965) following the work of Markowitz (1959). Since then it has produced amazing achievement because its simplified approach attracted many researchers. In spite of…

With this in mind, Sheryl explained that Cost-Volume-Profit (CVP) analysis would be useful to Thomas after he gathered some basic information about costs, revenues, and units of service. She explained that CVP is a fundamental management accounting tool that is useful for planning, control, and decision making. It explores important relationships between costs, volume or activity levels, and…

It now has a dividend yield of 2.61%, which is better than the industry average of 2.05%. As a result of HRB’s strong financial position, we expect the company to continue to enhancing its shareholders’ value. Financial Analysis HRB has two distinct sections of their business that drives the majority of their revenues. These business drivers include their retail division and the digital tax business that allows customers to self-file taxes electronically online. In fiscal year 2015, HRB…

assumption. Item/production cost is fixed: The cost of the product isn’t varying, so we can calculate the cost per order or quantity produced. For this case this is €2.5 /…

Both the firms are having the net revenues by average receivables value almost same. Both are able to quickly and efficiently collect the outstanding bills. By Asset turnover value mentioned above, 0.95 and 0.98, they are using their complete assets to generate the revenue. For every 100$ spent, Goodyear…

Calculating net operating profit after taxes or NOPAT. EBIT is the profit earned by the business by selling product before deducting financing cost and taxes. Net operating profit after taxes = Earnings before interest and taxes (1 – tax rate) NOPAT = EBIT(1-tax rate) Calculating net operating profit for 2013 NOPAT = $17,440 (1 – 0.40) NOPAT = $17,440 x 0.60 NOPAT = $10,464 Calculating net operating…

acquisition of Wild Oats, their long-term debt increased significantly. When compared to Trader Joe’s shoppers who spend 38 dollars per customer and Safeway whose shoppers spend 45 dollars per shopper, Whole Foods comes in lower with shoppers spending on average 28 dollars per customer. Whole Foods goal should consist of closing stores that are not profitable and reduce…