Weighted Average Cost of Capital

Scenario: You work for an investment banking firm and have been asked by management of Vestor Corporation (not real), a software development company, to calculate its weighted average cost of capital, to use in evaluating a new company investment. The firm is considering a new investment in a warehousing facility, which it believes will generate an internal rate of return of 11.5%. The market value of Vestor’s capital structure is as follows:

Source of Capital Market Value
Bonds $10,000,000
Preferred Stock $2,000,000
Common Stock $8,000,000

To finance the investment, Vestor has issued 20 year bonds with a $1,000 par value, 6% coupon rate and at a market price of $950. Preferred stock paying a $2.50 annual dividend was sold for $25 per share. Common stock of Vestor is currently selling for $50 per share and has a Beta of 1.2. The firm’s tax rate is 34%. The expected market return of the S&P 500 is 13% and the 10-Year Treasury note is currently yielding 3.5%.

Determine what discount rate (WACC) Vestor should use to evaluate the warehousing facility project.

Show all calculations

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Corporate Finance Blaine Kitchenware

You have been hired as a consultant to Victor Dubinski, the CEO of Blaine Kitchenware.  You are charged with putting together a written report with supporting numerical analysis that addresses the following items:

  1. Is the current capital structure and payout policy for Blaine optimal?  Explain and justify your conclusion.  Use numbers whenever possible.
  2. Should Blaine recommend a large share repurchase to the Board of Directors?  What are the advantages and disadvantages of this action?  Again, explain and justify your conclusions.  Use numbers whenever possible.
  3. Consider two specific share repurchase proposals:
    1. First Proposal
      1. Blaine will issue $50 million in new debt at an interest rate of 6.75%
      2. Blaine will use $209 million of cash from its balance sheet
      3. Blaine will use these two sources of cash to repurchase 14 million shares at $18.50/share.

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State two SMART goals for GE based on the case. Given the political issues discussed in the case, how might GE ensure that these goals are attainable? Discuss.

GE’S POOR PLANNING RESULTS IN DELAYS & INCREASED COSTS

DISCUSSION

1- Which of the fundamentals of planning did GE exe- cute ineffectively? Explain your rationale.

2. Which of the three types of goals were ineffectively managed by GE? Explain.

3. State two SMART goals for GE based on the case. Given the political issues discussed in the case, how might GE ensure that these goals are attainable? Discuss.

4. Using Figure 5.5, describe what GE could have done to improve the process of transporting the evaporator. Provide specific recommendations.

5. What did you learn about planning based on this case? Explain.

·  550 words with conclusion and use level header for each question.

·  3 sources and use APA format for the citation

·  Do not use it or if.

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Cash Flow Problem Sets, business and finance

Complete the following problem sets from Chapter 5 in Microsoft® Excel®:

5-1

FutureValueCompute the future value in year 9 of a $2,000 deposit in year 1 and another $1,500 deposit at the end of year 3 using a 10 percent interest rate.(LG5-1)

5-3

Future Value of an AnnuityWhat is the future value of a $900 annuity payment over five years if interest rates are 8 percent?(LG5-2)

5-5

Present Value Compute the present value of a $2,000 deposit in year 1 and another $1,500 deposit at the end of year 3 if interest rates are 10 percent.(LG5-3)

5-7

Present Value of an AnnuityWhat’s the present value of a $900 annuity payment over five years if interest rates are 8 percent?(LG5-4)

5-12

Present Value of an Annuity Due If the present value of an ordinary, 6-year annuity is $8,500 and interest rates are 9.5 percent, what’s the present value of the same annuity due?(LG5-6)

5-15

Effective Annual Rate A loan is offered with monthly payments and a 10 percent APR. What’s the loan’s effective annual rate (EAR)?(LG5-7)

5-39 (Calculate monthly payment only)

Click the Assignment Files tab to submit your assignment.

Loan Payments You wish to buy a $25,000 car. The dealer offers you a 4-year loan with a 9 percent APR. What are the monthly payments? How would the payment differ if you paid interest only? What would the consequences of such a decision be?(LG5-9)

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Risk and Return Problem Sets

All of these questions have to be answered in Microsoft Excel. The formulas have to be placed in and answered just like you would do if you were in the class. Complete the following problem sets from Chapter 7, Chapter 8, and Chapter 9 in Microsoft® Excel®:

7-21 Compute Bond Price Compute the price of a 3.8 percent coupon bond with 15 years left to maturity and a market interest rate of 6.8 percent. (Assume interest payments are semiannual.) Is this a discount or premium bond?

7-27 Yield to Maturity A 5.65 percent coupon bond with 18 years left to maturity is offered for sale at $1,035.25. What yield to maturity is the bond offering? (Assume interest payments are semiannual.)

8-19 Value a Constant Growth Stock Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 8 percent. Safeco’s recent dividend was $0.88. What is the value of Safeco stock when the required return is 12 percent?

8-21 Expected Return Ecolap Inc. (ECL) recently paid a $0.46 dividend. The dividend is expected to grow at a 14.5 percent rate. At a current stock price of $44.12, what is the return shareholders are expecting?

9-33 Risk, Return, and Their Relationship Consider the following annual returns of Estee Lauder and Lowe’s Companies

Estee Lauder                      Lowe’s Companies

year 1                            23.4%                                   -6.0%

year2                             – 26.0                                     16.1

year 3                               17.6                                     4.2

year 4                            49.9                                   48.0

year 5                               – 16.8                                    – 19.0

Compute each stock’s average return, standard deviation, and coefficient of variation. Which stock appears better? Why?

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Analyze the “Frank Smith Plumbing’s Financial Statement” spreadsheet.

Analyze the case study, “Frank Smith Plumbing.”

Analyze the “Frank Smith Plumbing’s Financial Statement” spreadsheet.

Compare the cost of the truck to the cash flow records

Compile your calculations in a Microsoft® Excel® document

Develop a 1,050-word analysis and include the following:

  • Explain why limited leverage is good for business.Show the profitability of the project so that Stephanie can convince her father to purchase the truck by borrowing money.
  • Explain how Stephanie should convince her mother that it is inappropriate to call the bank manager and his wife for assistance in getting the loan approval?
  • Analyze whether the investment in the truck is profitable.
  • Explain whether it is more beneficial for Frank to close his business.
  • Explain what you would do in this same situation.

Format your assignment consistent with APA guidelines.

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Create a chart summarizing the details of the investment for both Bob and Lisa.

This exercise should be done in “EXCEL SPREADSEET”.
  • Bob and Lisa are both married, working adults. They both plan for retirement and consider the $2,000 annual contribution a must.First, consider Lisa’s savings. She began working at age 20 and began making an annual contribution of $2,000 at the first of the year beginning with her first year. She makes 13 contributions. She worked until she was 32 and then left full time work to have children and be a stay at home mom. She left her IRA invested and plans to begin drawing from her IRA when she is 65.

    Bob started his IRA at age 32. The first 12 years of his working career, he used his discretionary income to buy a home, upgrade the family cars, take vacations, and pursue his golfing hobby. At age 32, he made his first $2,000 contribution to an IRA, and contributed $2,000 every year up until age 65, a total of 33 years / contributions. He plans to retire at age 65 and make withdrawals from his IRA.

    Both IRA accounts grow at a 7% annual rate. Do not consider any tax effect.

  • Write a two to three (2-3) paragraph summary in which you:
    • Create a chart summarizing the details of the investment for both Bob and Lisa.
    • Explain the results in terms of time value of money.

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How are venture capital private equity structured? How are private equity firms compensated? Why may Khosla Ventures be motivated to push for Square to seek an exit

Please read the article I attached above and answer these questions:

1. How are venture capital private equity structured? How are private equity firms compensated? Why may Khosla Ventures be motivated to push for Square to seek an exit?

2. What characteristics do the firms in case Exhibit 2 have in common? Do you agree with Marc Andressen’s thoughts regarding unicorn valuation levels? Why or why not?

3. What would the capitalization table look like after the series E issuance? What is the post-money valuation?

4. What returns would each class of investors realize if Square exited through an IPO rather than through a sale at valuations of $3 billion, $6 billion, or $9 billion? How would the returns change if the series E securities did not have the IPO ratchet?

5. Do you recommend investing in the series E preferred round?

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Explain the implications of leading within a changing global business environment.

Scenario: You are the CEO of MegaGlobe Business Solutions, a financial consulting corporation based in Chicago that has just recently opened new offices in São Paulo, Brazil and Shenzhen, Guangdong, China. As part of this transition, your employees will now be working collaboratively with employees at these locations to provide financial consulting services in these new markets. To assist with the transition, you will develop an internal leadership blog for your employees that addresses the implications of leading within a culturally-diverse and changing global business environment. This blog should focus on the need to positively adapt to a variety of leadership styles and individual differences within these cultures.

View the videos listed in this week’s classroom materials for ideas about how to effectively lead, motivate, and communicate with your employees about the need to adapt within this changing business environment.

Write a 700- to 1,050-word-internal leadership blog using the Leadership Blog template, and include the following:

  • Explain the implications of leading within a changing global business environment.
  • Describe the Team Leadership Model and how this relates to your current business practices.
  • Outline positive aspects of gender, diversity, culture, and teamwork that can improve overall business performance.
  • Apply principles of motivational leadership within a variety of diverse cultures.
  • Use at least one image, photo, chart, or graph to deliver a key concept within your blog.

Format your assignment consistent with APA guidelines.

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Based on Michael Porter’s discussion of the characteristics of an effective strategy, does AutoZone have a good strategy for growth? Explain

DISCUSSION

1. Using no more than two sentences, describe Auto- Zone’s strategy.

2. Based on Michael Porter’s discussion of the characteristics of an effective strategy, does AutoZone have a good strategy for growth? Explain.

3. To what extent is AutoZone following the five steps of the strategic-management process?

4. Conduct an environmental scan or SWOT analysis of AutoZone’s current reality and recommend whether the company’s current strategy is poised to succeed.

4. Which of Michael Porter’s four competitive strategies is AutoZone trying to follow? Discuss.

5. What is the greatest takeaway from this case in terms of strategic management?

·  550 words with conclusion and use level header for each question.

·  3 sources and use APA format for the citation

·  Do not use it or if.

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