1. What is yield to maturity for Nikes bonds 1. Why is it important to estimate a firms follow of capital? What does it retain? Is the WACC set by postors or by managers? WACC is basically the vomit of return required by a capital supplier in exchange for not winning on another(prenominal) couchment funds in another project with similar risk. In well-nigh ways, you enkindle describe it as opportunity woo. WACC is the lower set apart return required by capital providers and managers should totally invest in projects that give return in excess of WACC. WACC takes into circular all capital resources such as common stock, preffered stock, bonds and some(prenominal) other long-term debt. Usually a participations assets are financed by either debt or uprightness. By taking a weighted average we can mention hump out of the closet how much interest a company has to pay for every(prenominal) dollar it finances. The WACC is set by investors and not the managers and because of that we can only estimate it. 2. What was your estimate of WACC? What mistakes did Joanna Cohen make in her outline? Which rule is best for calculating the cost of equity? cost of equity =I utilise the 20 year at 5.74%+ geometric mean=5.9%x most recent beta .69=9.81% approach of Debt I utilize Yield to maturity to find cost of debt From Exhibit 4 PV= 95.60 N=40 (20years x 2) since its paid semiannually Pmt=-3.375 (6.
75/2) FV=-100 Comp I = 3.58% (semiannual) 7.16% (annual) After revenue enhancement cost of debt = 7.16%(1-38%) = 4.44% E = securities ind ustry place take report of the firms equit! y To find Market value of rightfulness you cypher share price by amount of shares $42.09x273.3= 11503. D =Â market value of the firms debt I valued book value of debt at 1,291 Then divide 11503/(11503+1291)=89.9 so the weight for debt is 10.1 percent When I calculated WACC 4.44%x.101+9.81%x.899= 9.27% Cohen made a few mistakes when she calculated her WACC. First, she used historical data in estimating cost of debt. She ended up dividing interest expenses by the average balance of debt to communicate...If you want to exact a full essay, order it on our website: OrderCustomPaper.com
If you want to get a full essay, visit our page: write my paper