...INSTITUTO TECNOLÓGICO Y DE ESTUDIOS SUPERIORES DE MONTERREY SEMINARIO INTEGRADOR DE FINANZAS Caso “The Wm. Wrigley Jr. Company: Capital structure, Valuation, and Cost of Capital” Profesor Titular: Dr. Roberto Joaquín Santillán Salgado Profesor tutor: Mtra. Karla Macías Yanin Guerrero Enríquez A01180790 29/Mayo/2014 Introducción Blanca Dobrynin, administradora asociada de Aurora Borealis LLC, propuso a Susan Chandler, una asociada, a iniciar la búsqueda de una inversión potencial en Wrigley. Aurora Borealis tenía un fondo de cobertura de 3 billones bajo administración y una estrategia de inversión que se enfocaba en empresas con dificultades, arbitraje de fusiones, transacciones de cambio de control y recapitalizaciones. El típico modelo de operación de Blanca Dobrynin consistía en identificar oportunidades para una corporación para reestructurarla, invirtiendo significativamente en el capital de la empresa objetivo, y encargarse del proceso de persuadir al administrador y directores de reestructurar. Chandler notó que el valor de mercado del capital común de Wrigley era de 13.1 billones. Dobrynin y Chandler discutieron de las condiciones del mercado de capital actual y decidieron enfocarse en el supuesto de que Wrigley podía pedir prestados 3 billones en una clasificación crediticia entre BB y B, con un rendimiento del 13%. La compañía Wrigley era el fabricante y distribuidor de goma de mascar más grande del mundo. La industria era intensamente...
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...asertivo usar una tasa de descuento apropiada para utilizar el método VPN o utilizar la tasa interna minima con el método TIR. Esta duda lleva a que no se esta logrando lo deseado. Identificar objetivos Uno de los objetivos principales es la valoración de estos proyectos. Chem- Cal Corporation debe volver a calcular el VPN de cada proyecto. Lograr una tasa de capital es decir la mejor opción es el Wacc y ver las fuentes para conseguir los recursos. Análisis de opciones para conseguir más capital - Elevar Ratios de deuda (30% cerca de la media del sector) - Vender bonos de 5 millones de dólares (un poco mas de 10.5%) - Fondo de amortizaciónDiagnostico Encontrar una fuente de financiamiento que no sea superior o igual al 11% y esa tasa seria un 10% para ajustar al wacc ya que los cálculos de valor presente neto VPN no entrega una representación adecuada de los proyecto. Además la compañía debería mantener algún sistema para considerar las inversiones propuestas. Plan de acción La compañía debe utilizar el valor presente neto VPN con una tasa de descuento del Wacc ya existen restricciones de capital, el VPN es una herramienta mas útil ya que considera al...
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...Calaveras Vineyard GUSTAVO OCATVIO HERRERA OCAMPO A00313848 FZ 4007 – Finanzas corporativas avanzadas Calaveras Vineyard Antecedentes • NationsBank´s investment-banking group invita a Goldengate Capital a participar en un préstamo para la adquisición de Calaveras Vineyards. • El préstamo asciende a $4.5M; $2M a largo plazo, $2.5 línea de crédito revolvente. • Calaveras Vineyard es una empresa fundada en 1883 con una exitosa gestión de la marca a través del tiempo. Cuenta con 220 acres de los cuales 175 son viñedos. • Calaveras cuenta con 5 categorías de producto: 2 en el segmento super-premium (64.3% de las ventas). • Alta concentración de la distribución en el canal de mayoreo (67%). • Disminución de la demanda de bebidas alcohólicas excepto para la categoría de vinos. • 50% de los requerimientos de uva son obtenidos con mediante 2 contratos de largo plazo, una porción limitada del proceso de fermentación y el almacenaje de producto terminado estaba arrendada a un vecino • Evolución positiva de la rentabilidad gracias al aumento del precio promedio. • Proyecciones financieras ambiciosas (optimistas) • Valor de mercado de los activos se estima entre $5 y $7 M. • Actual gerente general y gerente operativo potenciales compradores (con participación de 85% y 15% respectivamente) FZ 4007 – Finanzas corporativas avanzadas Calaveras Vineyard Análisis cualitativo Fortalezas: • Empresa con abolengo. • Expertos en producción y comercialización de vinos (Saberhacer)...
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...Book Value VS Market value Weights You should always use the market value weights to calculate WACC. In practice, firms do use the book value weights. Generally, there will be difference between the book value and market value weights, and therefore, WACC will be different. WACC, calculate using the book value weights, will be understand if the market value of the share is higher than the book value and vice versa. Why do managers prefer the book value weights for calculating WACC? Beside the simplicity of the use, managers claim following advantages for the book value weights: Firms in practice set their target capital structure in terms of book values. The book value information can be easily derived from the published sources. The book value debt equity ratios are analyzed by the investors to evaluate the risk of the firms practice. The use of the book value weights can be seriously questioned on theoretical grounds. The component costs are opportunity rates and are determined in the capital markets. Te weights should also be market determined. The book value weights are based on arbitrary accounting policies that are used to calculate retained earnings and value of assets. Thus they are not reflecting economic values. It is very difficult to justify the use of the book value weights in theory. Market value weights are theoretically superior to book value weights. They reflect economic values and are not influenced by accounting policies. They are also...
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...02/2012. <vbk:978-1-4562-0587-4#outline(13.11.6)>. 5. Cálculo del costo de la deuda Shanken Corp. emitió un bono a 30 años a una tasa semestral de 7% hace siete años. Hoy, el bono se vende en 108% de su valor nominal. La tasa tributaria de la compañía es de 35%. a) ¿Cuál es el costo de la deuda antes de impuestos? b) ¿Cuál es el costo de la deuda después de impuestos? (ROSS 422) ROSS, STEPHEN A.. FINANZAS CORPORATIVAS, 9th Edition. McGraw-Hill Interamericana, 02/2012. <vbk:978-1-4562-0587-4#outline(13.11.6)>. 8. Impuestos y WACC Miller Manufacturing tiene una razón de deuda a capital accionario fijada como meta de .45. El costo de su capital accionario es de 17%, y el de su deuda es de 10%. Si la tasa tributaria es de 35%, ¿cuál será el WACC de Miller? (ROSS 422) ROSS, STEPHEN A.. FINANZAS CORPORATIVAS, 9th Edition. McGraw-Hill Interamericana, 02/2012. <vbk:978-1-4562-0587-4#outline(13.11.6)>. 11. Cálculo del WACC En el problema anterior suponga que las acciones de la compañía tienen una beta de 1.2. La tasa libre de riesgo es de 5.2% y la prima de riesgo de mercado es de 7%. Suponga que el costo total de la deuda es el promedio ponderado que implican las dos emisiones de deuda en circulación. Ambos bonos hacen pagos semestrales. La tasa tributaria es de...
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...qué ha llegado a tal conclusión. 2.- ¿Cuál es el precio máximo que pudiera llegar a pagar Monmouth, basándose en una valuación usando análisis de flujo de efectivo descontado, cálculo de WACC, y determinación del valor terminal? Ver Notas y/o “Tips” relacionadas con esta pregunta. 3.- ¿A qué se debe que Simmons esté tan deseoso de vender su posición a Monmouth por $50 por acción? ¿Cuáles son las preocupaciones, así como las alternativas, para cada uno de los otros grupos de accionistas de Robertson? 4.- La administración de Monmouth le solicita asesoría acerca de cómo debe de diseñar, así como también el implementar, una oferta que resultara exitosa para la adquisición de Herramientas Robertson. ¿Cuál, o cómo sería su asesoría? Por favor, justifique su respuesta. NOTAS Y/O “TIPS” (1(1) El título del capítulo 9 de su libro de texto es, precisamente: “Usando análisis de flujo de efectivo descontado para hacer decisiones de inversión?, entonces usted puede aplicar lo estudiado en dicho capítulo. (2(2) Se le recomienda ampliamente estudiar la sección 13.2: “The Weighted-Average Cost fo Capital” (WACC), a partir de la página 367 del libro de texto. En particular, asegúrese de que ha interiorizado tanto la lógica, como la o las fórmulas para calcular el WACC. (3) De igual manera, ampliamente se le recomienda estudiar la sección 13.7 de su libro de texto, (a partir de la...
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...194.00 21,847.00 24,305.00 TOTAL PATRIMONIO 122,958.00 TOTAL PASIVO Y PATRIMONIO 244,353.00 ESTADO DE RESULTADOS 2011 Ventas Costo de ventas Utilidad bruta 333,307.00 266,475.00 66,832.00 Gastos de venta y distribución Gastos de administración Otros ingresos operativos Otros gastos operativos Utilidad operativa 41,048.00 13,851.00 2,342.00 409.00 13,866.00 Ingresos financieros Gastos financieros Diferencia de cambio Utilidad antes de impuestos 619.00 4,326.00 644.00 10,803.00 Impuestos Utilidad Neta 3,554.00 7,249.00 COSTO DE CAPITAL Beta desapalancado Beta apalancado Rf (Rm - Rf) Rp Kd t Kd neto Ke WACC 0.8 (Damodaran) 0.98 2.19% 6.00% 2.31% 6.50% 30% 4.55% 10.36% 8.74% NOPAT Activos Operativos (A.O.) ROCE (ROCE - WACC) EVA BENEFICIO ECONÓMICO SUPUESTOS Crecimiento...
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...According to our text the r above the little e is the required return for equity, and the r above the d is the required return for debt. L is the market value proportion of debt financing and T is the marginal corporate tax rate on income for the proposed project. In word format the equation states that WACC is the equity of the firm divided by the debt plus equity times the required return of equity plus the debt divided by the debt plus equity times one minus the marginal corporate tax rate on the project times the required return for debt. This should equal one minus the market value proportion of debt financing times the required return for equity plus the market value proportion of debt financing times one minus the marginal tax rate times the required return for debt. The WACC is expressed as an after-corporate-tax- return because investors are paid after the corporate taxes are. Furthermore, in regard to equity is also an after corporate tax return (Emery, Finnerty & Stowe, 2007). To use the WACC one must understand the purpose is twofold. First as a measure to ensure that the financial obligation of the company is being held to a certain set of standards. The end goal of the WACC is to generate capital for those who hold stake within the company. When these numbers are not reflected are there are measured losses this is how the company can see that changes need to be made to shift in a profitable...
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...PRODUCTOS DE HOGAR - VALORACIÓN DE BONOS Y ACCIONES En todos los libros de texto, la valoración de las acciones y bonos se limita a indicar que es el valor actual de todos los flujos de efectivo futuros esperados con seguridad. El concepto es lógico, sencillo, y engañosamente simple. La valoración de los bonos por lo general se presenta primero, hasta los relativos flujos de efectivo seguros se dividen en una anualidad y un pago del valor nominal en una fecha específica en el futuro. La valoración de las acciones preferidas deduce o sigue la valoración de bonos y el valor de las acciones preferentes se muestra como el valor actual de la anualidad perpetua. Los flujos de efectivo de los dividendos de tamaño constante es bastante seguro, y la mayoría de las acciones preferentes no tienen una fecha de vencimiento. Por último, las acciones comunes se presentan pero ni los flujos futuros de efectivo (de dividendos), ni el valor final se conoce con certeza, generalmente, los estudiantes parecen entender las técnicas de valuación de bonos y acciones preferentes, pero tienden a ser muy escépticos del modelo de valoración de las acciones comunes. El uso de los modelos de flujo de efectivo descontados en una empresa real puede ayudar a disipar algunas de las dudas, pero lo más importante, puede indicar cómo los modelos explican el comportamiento de los precios. HOME PRODUCTS, INC. Home Products, Inc, (HPI) es un fabricante líder de medicamentos de receta y éticos; especialmente...
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...000 Long-term debts (bonds) $5,000,000 Total liabilities + equity = $10,000,000 1. Calculate the firm's WACC = 50% (4%)(1-40%) + 20%(12%) + 30%(6%) = .50(.04)(1-.40) + .20(.12) + .30(.06) = 0.012 + .042 = .054 or 5.4 % 2. If, as the firm's CFO, you wished to lower the WACC, make up a set of new dollar figures using different amounts of common stock, preferred stock, and long-term debt that would lower the WACC. Show the calculations to demonstrate that the new capital structure has a lower WACC than the original structure. Capital | Debt 60% | Equity 40% | Bonds | 4% | C. Stock (10) | 12% | tax | 40% | P. Stock (30) | 6% | Common stock $1,000,000 Preferred stock $3,000,000 Long-term debts (bonds) $6,000,000 Total liabilities + equity = $10,000,000 = 60%(4%)(1-40%) + 10%(12%) + 30%(6%) = .60(.04)(1-.40) + .10(.12) + .30(.06) = 0.0144 + .03 = .0444 or 4.44 % 3. Explain why you may want to lower the firm's WACC. By increasing the firm’s dept and contribution by the preferred stock holders, the WACC has decreased. A CFO may want to lower a firm’s WACC as an expressed desire to improve ROE. This can be done by the approval of more projects that were previously denied because the WACC was too high. Also, the lower...
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...All companies must make decisions about how they will finance their current and future operations. Firms can elect to borrow funds or they can sell stakes in the company to shareholders. For companies to make these decisions, they need to consider the capital structure, or mix of debt and equity, of the firm. They must also determine the cost of their debt, the cost of their equity, and the cost to acquire new capital. Generally, a firm’s cost of capital is what it costs the firm to acquire money. It may also be thought of as the rate required by investors (lenders or shareholders) for the use of their money. The cost of capital could be the cost of the financing the firm already has or it could be the cost of new financing, which is referred to as the marginal cost of capital. When evaluating projects, the internal rate of return on the project, or how much money the project will generate, can be compared to the cost of capital, which is the cost of financing such a project. If the rate of return exceeds the cost of capital, the project is probably a good one (in terms of cost only). The cost of capital takes into account the cost of debt and the cost of equity. The cost of debt could be the effective interest or coupon rate a firm currently pays on its debt. It could also be the rate of return required by a firm’s creditors. The cost of debt is often calculated net of taxes, since firms can deduct interest expense from their income for tax purposes. The after-tax cost of debt...
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...INTRODUCTION This memo addresses the feasibility of the NESA project and provides a brief overview of: our financial condition, the iron ore market, major risks associated with this project, estimated project NPV, and the benefits of the financing packages. From our analysis, the NPV of this project is $137.36M - $104.31M. While there is risk associated with venturing into an unfamiliar market in a politically volatile country, the debt financing packages mitigate this risk. Thus, we believe that the project should be accepted. FINANCIAL CONDITION We experienced growth in earnings from $98M in 2002 to $1.84B in 2011, due to improved operating margins (Appendix 1). The improvements in ROE and ROA have outpaced our competitors, implying that we are getting higher returns for each dollar invested in shareholder’s equity and assets. Although we have a more aggressive debt strategy, our D/E ratio never exceeded 50% from 2002 to 2011. Despite the slight 4% decrease in our cash and current ratios, their values are still well above one. We are still in a good financial position as we have accumulated a lot of cash and our debt is being used effectively to take advantage of investment opportunities. Therefore, we are in an excellent position to take on new projects. NEW INVESTMENT OPPORTUNITY AND ASSOCIATED RISKS The iron ore investment in South Africa is an attractive opportunity since it allows us to diversify our operations and lessen our dependence on unsustainable gold...
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...CALCULATION of WACC for Quarter 2 (Based on the “Summary Data” from Sample Quarter 1) What is the market value of the capital raised by debt? (for debt, book value approx = market value) Short-term Loans Maturing $ 0 Intermediate Term Debt Maturing $1,850,000 Current Liabilities Bond Maturing $1,200,000 Intermediate Loans 2 year $ 937,500 3 year $ 0 Long Term Liabilities Bonds $1,200,000 Total Capital Raised by Debt $5,187,500 What is the market value of the equity? Multiply stock price ($37.49) times number of common shares (1,000,000) = $37,490,000 What is the market value of the debt + equity? $5,187,500 + 37,490,000= $42,677,500. What would be the annual after-tax cost for new long-term bonds? The cost of long term debt (Bonds) for quarter 2 will be 1.980% per quarter (this is found under Information for Future Quarters) which is 7.92% per year The after-tax cost is 7.92% x (1-0.4) = 4.75%/Yr What would be the after-tax cost of new short term loans? 1.616% x 4 = 6.46% x (1-.4) =3.88% / year What would be the after-tax cost to get more 2 and 3 year debt? (To keep things simple, just take an average of the cost of new 2 and 3 year debt, then reduce the cost by the tax shield): [1.698% + 1.784%] / 2 = 1.74% per quarter x 4 =6.96% per year x (1-.4) = 4.18% / year. (To be most correct you should take a weighted average, but a simple average is ok for our purposes) What is the cost of equity...
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...yield to maturity of 10%. The firm's income statement is as follows: EBIT | RM150 million | Interest Expense | RM 20 million | Taxable Income | RM130 million | Taxes | RM 52 million | Net Income | RM 78 million | The current risk-free rate is 8% and the market risk premium is 5.5%. i. What is the firm's current weighted average cost of capital? (3 marks) Market Value of Equity =Share Outstanding * Price per Share = 40 million * $ 20 = 800 Cost of Equity = Risk Free Rate + AVG Beta (Market Risk Premium Rate) =8% + 1.15 (5.5%) = 14.33% Cost of Capital = Cost of Equity (Risk Free Rate) + YTM (1- Tax Rate)(Debt Portion) = 14.33% (0.8) + 10% (1-0.4) (0.2) = 12.66% Therefore WACC = 12.66%. This value can be used to discount any project ii. The firm is proposing borrowing an additional RM200 million in debt and repurchasing stock. If it does so its rating will decline to A, with a market interest rate (yield to maturity) of 12%. What will the weighted average cost of capital be if they make this move? (3 marks) New Market Value of Equity = RM800 Million – RM200 Million = RM600 Million If the firm borrows RM 200 million repurchase stock, Equity will drop to RM 600 million New Debt/Equity Ratio = Debt Value / Equity Value = 400/600 = 0.67 Unlevered Beta = AVG Beta / (1+ Equity Portion * Old Debt Equity Ratio) = 1.15 / (1 + 0.6*0.25) = 1.00 New Beta = Unlevered...
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...Q1. What are the determinants of a company’s cost of capital? A corporate cost of capital can be specifically defined as the opportunity cost of all capital invested in the enterprise. Opportunity cost refers to what is given up as a consequence of a decision to use a scarce resource, capital invested refers to the total amount of cash invested into a business, and this includes both debt and equity components used in the investment in the enterprise. A three step process is used to calculate a company’s weighted average cost of capital. First is to determine the cost of capital components, which is namely debt and equity. A. Debt capital. The cost of debt capital is equivalent to actual or imputed interest rate on the company's debt, adjusted for the tax-deductibility of interest expenses. Specifically: The after-tax cost of debt-capital = The Yield-to-Maturity on long-term debt x (1 minus the marginal tax rate in %) B. Equity capital. Equity shareholders, unlike debt holders, do not demand an explicit return on their capital. However, equity shareholders do face an implicit opportunity cost for investing in a specific company, because they could invest in an alternative company with a similar risk profile. Thus, we infer the opportunity cost of equity capital. We can do this by using the "Capital Asset Pricing Model" (CAPM). This model says that equity shareholders demand a minimum rate of return equal to the return from a risk-free investment plus a return for...
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