WACC Essay

Financial Analysis for XYZ Company Using EVA & WACC Question 1: Reflecting to question one in the tutor marked assignment case study, which relate to the XYZ Company through analyzing the financial accounting statement to understand the company’s internal performance in terms of strengths and weaknesses by explaining the EVA and its advantage and disadvantages of using EVA as company performance measurement toll in the period from 2011 to 2015. Calculating EVA and explaining the trend 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…

The weighted average cost of capital, commonly referred to as WACC, is an important and widely accepted tool for companies to use. WACC allows the company to value future projects and the company as a whole by proportionately weighing each category of capital; because of this a firm’s WACC is dependent on the capital structure of the firm. Investors also use this tool to confirm whether or not companies are worth the investment risk. The higher the WACC, the higher the investment risk of a…

Sarawak and provision of bulking installation facilities for palm oil, edible oils, vegetable oils, fats and its by-products. In this report, we are 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…

net income had fallen from almost $800 million to $580 million, and their market share in athletic shoes had dropped from 48 percent in 1997 to 42 percent in 2000. In a meeting held on June 28, 2001, management announced plans to grow performance. To increase revenue, Nike is developing athletic shoes in a mid-priced segment. Nike also planned to push its apparel line. On the cost sides of things, they will be more conscientious on expenses. As there are mixed feelings from analysts on these…

Corporate Finance and Applications Fall 2016 Professor R.A. Michelfelder, Ph.D. 52:390:310 December 14, 2016 Due: Tuesday, December 20, 2016 11:59 PM by Email FINAL EXAMINATION Please briefly respond to all of the following questions on each page. There are 6 pages of questions. This is a take-home examination. All responses are to be in your own words. This examination is due on Tuesday, 12/20/2016 at 11:59 PM and there are no exceptions. Any late submittals will result…

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%, 7%, 10.26), is established in order to find the influence to the WACC. The capital structure directly appears in the formula of computation of WACC. It also has an impact on the beta and cost of equity. The capital structure of D/V =…

For example, using a standard deviation of a highly correlated distribution of stocks that includes 3 kitchen & bath companies and 3 engine & generator companies, the Beta will decrease from 2.67 to 1.52. Then, the new WACC would be 10.40%[Table 5]. Just this difference in Beta would make the per share value of the stock go from $164K to $251K with 0 discount (due to the lack of control and liquidity), and from $ 57K to $ 88K with 65 % discount [Table 7]. Kohler is most likely…

Changing of capital structure in the company will impact the WACC calculation for e.g. company intend to raise more debt instead of equity and the WACC rate will be lower and the total NPV will be increase. Consequently, the management need to be maintain the capital structure at the desire level in order to make the project to be success. There is important of the cash flow generate from the project that NPV calculation are sensitive to the cash flow input of each year. If there is change or…

the different impacts of a 2% tax rate versus a 5%. The revenue starts at 100,000 BRL and grows at a rate of 5% month over month. The rate used to calculate the two discounted-cash-flow analyses is the weighted average cost of capital (WACC). The WACC is factors the company’s cost of capital by proportionally weighing each type of capital. The WACC is based solely on the cost of equity (COE) since the assumption is made that the company is a foreign venture has no debt or at least no debt in the…

huge growth potentials). Forecasts predicted that growth synergies were expected to achieve $800 million of annual cost synergies and to generate $2.0 to $2.6 billion in additional present value. After this purchase, Dow would reinforce its global leader position in specialty chemicals company. Besides, the Haas family wanted to sell “substantially all” of their shares (32% of Rohm). To determine the present value of cashflows, we need to get projected growth rate (2%) and WACC; because…