FIN550- Cost of Capital discussion

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. (Estimating the WACC from the asset structure) Dhillon Industries has three major invest- ments, which are given here. What should be the firm’s WACC? INVESTMENT                                    MARKET VALUE           REQUIRED RETURN   Storage sheds                       $35 million                         12% Ice rinks                               $15 million                           17% Office furniture sales             $50 million                          15%

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Blue Devil Corp. has two sources of funds: long-term debt and equity capital. The company has profit centers in the following regions with the following net incomes and total assets:   Net Income Assets North America $800,000  $10,000,000 Asia 1,170,000 12,000,000 Europe 680,000 8,000,000   Required: a. Calculate ROI for each profit center, and identify which region has the best performance. Round your answer to two decimal places. b. Calculate the residual income for each profit center based on a desired ROI of 8.5%, and identify which region’s performance is below the company’s expectation.

FedEx Corporation and United Parcel Service, Inc. compete in the package delivery business. The major fixed assets for each business include aircraft, sorting and handling facili- ties, delivery vehicles, and information technology. The sales and average book value of fixed assets reported on recent financial statements for each company were as follows: FedEx UPS Sales (in millions) $47,453 $58,363 Average book value of fixed assets (in millions) 20,213 18,317 a. Compute the fixed asset turnover ratio for each company. Round to one decimal place. b. Which company appears more efficient in using fixed assets? Interpret the meaning of the ratio for the more efficient company. C.

Shaq Company operates with three segments: Louisiana, Orlando, and Los Angeles.Data regarding these segments is as follows:   LouisianaSegment OrlandoSegment Los AngelesSegment Contribution to indirect expenses $328,500 $207,600 $155,500 Assets directly used & identified with segment $1,858,700 $1,410,000 $742,600   1. Calculate the return on investment for each segment. Rank them from highest to lowest. Round percent to 1 decimal place.   LouisianaSegment OrlandoSegment Los AngelesSegment Segment Net Income       Investment base (assets)       ROI (%)       Rankings (1,2, or 3, where 1 is the best)       2. Assume the cost of capital is 14% for a segment. Calculate residual income for each segment. Rank them from highest to lowest. Round percent to 1 decimal place.   LouisianaSegment OrlandoSegment Los AngelesSegment Segment Net Income       Investment base (assets)       Cost of Capital (%)       Minimum Income       Residual Income…

7. Responsibility Accounting: a. What is a cost center? Give an example of a cost center b. What is a Profit center? Give an example of a profit center c. What is an investment center? Give an example of an investment center d. What is management by exception: e. The Hydride Division of Murdoch Corporation is an investment center. It has $1,000,000 of operating assets. During 2022, the Hydride Division earned operating income of $400,000 on $5,000,000 of sales. Murdoch's companywide return on investment or desired rate of return is approximately 20% SHOW WORK FOR CREDIT! 1. What is the ROI? 2. What is the margin? 3. What is the turnover? 4. What is the residual income?

Use after-tax operating income and the individual cost of capital of each division to calculate residual income and compare.

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Kashmiri's Cost of Capital. Kashmiri is the largest and most successful specialty goods company based in Bangalore, India. It has not yet entered the North American marketplace, but is considering establishing both manufacturing and distribution facilities in the United States through a wholly owned subsidiary. It has approached two different investment banking advisors, Goldman Sachs and Bank of New York, for estimates of what its costs of capital would be several years into the future when it planned to list its American subsidiary on a U.S. stock exchange. Using the assumptions by the two different advisors in the popup window, E, calculate the prospective costs of debt, equity, and the WACC for Kashmiri (U.S.). What is the after-tax cost of debt estimated by Goldman Sachs for Kashmiri? 6.24% (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Assumptions Symbol Goldman Sachs Bank of New York 0.86 0.36 Estimate of…

Blossom and Telecommunications Corporation has three divisions. The names of these divisions, along with the after-tax cost ofcapital for each division and the market value of the assets in each division, are as follows:Division NameCost of CapitalMV of AssetsInfrastructure development6.45$185,000,000Power5.50$241,000,000Telecommunications6.10$500,000,000EvWhat is the overall after-tax cost of capital for Blossom and Telecommunications? (Round answer to 2 decimal places, e.g. 52.75%.)After-tax cost of capital

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As consultants in advisory services, we are hired by Sayko Corp to help analyze its regional operations in the contiguous U.S. Sayko wishes to draw on our expertise in financial statement analysis to help identify further expansion of operations. Please complete the following with the information on the map (image). 1. Compute profit margin for each region.3. Compute return on total assets for each region.

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Suppose a company like Target Distribution Centers is looking at 3 mutually exclusive alternatives for locations to build their new Distribution Center.Scenario 1 is a DC in Akron. CAPEX Cost $18 million, project NPV $3.8 millionScenario 2 is a DC in Canton. CAPEX is $14.2 million, project NPV is $2.8 millionScenario 3 is a DC in Warren, CAPEX is $11.8 million, project NPV is $3.3 millionWhat would be your recommendation? Group of answer choices a. Scenario 2 b. Scenario 3 c. None of the above d. All of the above e. Scenario 1

All parts are under one question, per your policy all parts can be answered.  3. Analysis of an expansion project Companies invest in expansion projects with the expectation of increasing the earnings of its business. Consider the case of Yeatman Co.: Yeatman Co. is considering an investment that will have the following sales, variable costs, and fixed operating costs:     Year 1 Year 2 Year 3 Year 4 Unit sales 3,000 3,250 3,300 3,400 Sales price $17.25 $17.33 $17.45 $18.24 Variable cost per unit $8.88 $8.92 $9.03 $9.06 Fixed operating costs $12,500 $13,000 $13,220 $13,250   This project will require an investment of $15,000 in new equipment. Under the new tax law, the equipment is eligible for 100% bonus deprecation at t = 0, so it will be fully depreciated at the time of purchase. The equipment will have no salvage value at the end of the project’s four-year life. Yeatman pays a constant tax rate of 25%, and it has a weighted average cost of…

Assume that Google invests $2.42 billion in capital expenditures, including $1.08 billion related to manufacturing capacity. Assume that these projects have a seven-year life and that management requires a 15% internal rate of return on those projects. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)Required1. What is the amount of annual cash flows that Google must earn from those expenditures to achieve a 15% internal rate of return? (Hint: Identify the seven-period, 15% factor from the present value of an annuity table and then divide $1.08 billion by the factor to get the annual cash flows required.)2. Refer to the financial statements in Appendix A. Identify the amount that Google invested in capital assets for the year ended December 31, 2017.3. Did Google or Apple invest more in capital assets for 2017?   What is the amount of annual cash flows that Google must earn from those expenditures to achieve a 15% internal rate of…

I need assistance on Identifying each of the following as either capital budgeting (investment) or financing decisions and an explanation on why? Intel decides to spend $1 billion to develop a new microprocessor. Volkswagen borrows 350 million euros from Deutsche Bank. Royal Dutch Shell constructs a pipeline to bring natural gas onshore from a production platform in Australia. Avon spends 200 million euros to launch a new range of cosmetics in European markets. Pfizer issues new shares to buy a small biotech company.

SA Construction Limited currently operates in Trinidad. The company is considering setting up another location in either Barbados or Jamaica. The Projected Income Statement for 2023 is as follows:USDIncomeSales 90,000Interest Income 2,500Dividend Income 6,000Other Income (exempt) 2,000ExpensesDepreciation 20,000Interest Expenses (1) 7,000 Repairs & Maintenance 1,500Legal & professional fees (2) 8,000Salaries 30,000 Bad debts (3) 3,000Other Expenses (4) 20,000  Taxation 2,250Notes1. All Interest was paid. There was no accrued interest at year end.2. Professional fees consist of:• Audit and accountancy fees $3,600• Legal fees re collection of bad debts $2,000• Cost of setting up business in the selected location $900• Architect’s fee for designing a warehouse that has not yet been constructed $1,5003. The Bad Debts expense represents a debt which was outstanding for 270 days.4. Other expenses include $1,000 for expenses paid on behalf of another company owned by SA Construction…

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(Question 3) Finder Health Corp is one of the biggest companies in the United States with the market capital $69.2 billion. It also operated in Singapore and United Kingdom. Below are the details of the transactions for Finder Health Corp throughout the year: i. The total sales produced for each countries is 900,000 units. United States produce 500 000 units with USD25 per unit, 200000 units is from Singapore at SGD18 and the remaining balance is from United Kingdom at GBP30 per unit. ii. In order to reduce the cost of production, Finder Health Corp import the cost of material which imported from United Kingdom is 400000 unit at GBP15 per unit. The balance was incurred in Singapore where the cost of material is SGD15 per unit. iii. Fixed costs is USD 950000 and variable operating expenses represent approximately 10 percent of each from United States and only United Kingdom which out of their sales. iv. Interest expense is estimated at SGD 75000 on Singapore loans only. v. The exchange…