Cost and EQuity in access paper by Gada Korayim UNIVERSITY OF SOUTHERN CALIFORNIA EDU 628 - Professor Tatiana Melguizo Due Date: March 8, 2015 Introduction The diversity of colleges in the higher education landscape stems from the diversity of missions. For one, the obstacles to innovation in higher education in the USA has been a debate for years. There are colleges that focus on liberal arts education as Dr. Liz Coleman (TED Talks) lectured during her speech
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Taking a Risk with Apple: Cost of Equity TUI University Monessa Catuncan Module 3 SLP FIN501- Strategic Corporate Finance Dr. William Anderson 26 March 2012 Introduction Debt Ratio and Debt to Equity Ratio Calculations for Apple Inc. Total Liabilities (L) = 39.756B Total Equity (E) = 76.615B Short-term Liabilities (SL) = 0 Long-term Liabilities (LL) = 0 (finance.google.com) Debt Ratio =LL+E= 39.75639.756+76.615= 39.756116.371=0.342 Debt to Equity Ratio =LE= 39.75676.615=0
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Aswath Damodaran 2 Equity Valuation versus Firm Valuation n n Value just the equity stake in the business Value the entire business, which includes, besides equity, the other claimholders in the firm Aswath Damodaran 3 I.Equity Valuation n The value of equity is obtained by discounting expected cashflows to equity, i.e., the residual cashflows after meeting all expenses, tax obligations and interest and principal payments, at the cost of equity, i.e., the rate of return
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What is the Company’s Cost of Common Equity if all of its equity comes from retained earnings? Cost of Common Equity (R) = [D1 / P0] + g Cost of Common Equity (R) = [$3 / $30] + 0.05 Cost of Common Equity (R) = 0.15 (or) 15% Cost of Common Equity (R) = 15% (b) If the Company issued new stock, it would incur a 10% flotation cost. What would be the cost of equity from new stock? Cost of equity from new stock (R) = [D1 / P0 (1-flotation Cost)] + g Cost of equity from new stock (R) = [$3
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recapture. c. the weighted average cost of capital. d. private debt placement. e. personal offset. Difficulty level: Easy MM PROPOSITION I b 2. The proposition that the value of the firm is independent of its capital structure is called: a. the capital asset pricing model. b. MM Proposition I. c. MM Proposition II. d. the law of one price. e. the efficient markets hypothesis. Difficulty level: Easy MM PROPOSITION II c 3. The proposition that the cost of equity is a positive linear function
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Berkshire Instruments Cost of Capital A1 Hansen, the newly appointed vice president of finance of Berkshire Instruments, was eager to talk to his investment banker about future financing for the firm. One of Al's first assignments was to determine the firm's cost of capital. In assessing the weights to use in computing the cost of capital, he examined the current balance sheet, presented in Figure 1. In their discussion, Al and his investment banker determined that the current mix in the
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your firm and the right mix of debt and equity to fund your operations The Dividend Decision If you cannot find investments that make your minimum acceptable rate, return the cash to owners of your business The hurdle rate should reflect the riskiness of the investment and the mix of debt and equity used to fund it. The return should reflect the magnitude and the timing of the cashflows as welll as all side effects. The optimal mix of debt and equity maximizes firm value The right kind of
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MANAGEMENT ADVISORY SERVICES COST OF CAPITAL THEORY 1. All of the following statements are correct except: a. The matching of asset and liability maturities is considered desirable because this strategy minimizes interest rate risk. b. Default risk refers to the inability of the firm to pay off its maturing obligations. c. The matching of assets and liability maturities lowers default risk. d. An increase in the payables deferral period will lead to a reduction in the need
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long term debt-equity ratio for the prior two years. Why would these companies use such different capitals structures? 2. Look up a company and download the annual income statements. For the most recent year, calculate the average tax rate and EBIT, and find the total interest expense. From the annual balance sheets calculate the total long-term debts (including the portion due within one year). Using the interest expense and total long term debts, calculate the average cost of debt. Next,
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Financial Management Decisions COST-VOLUME-PROFIT ANALYSIS 2.2 Cost Of Capital This Section includes : • Cost of Capital-Key Concepts • Importance • Classification • Determination of Cost of Capital • Computation • Weighted Average Cost of Capital INTRODUCTION: It has been discussed in lesson -4 that for evaluating capital investment proposals according to the sophisticated techniques like Net Present Value and Internal Rate of Return, the criterion used
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