Essay on Hassan Private Label

General speaking, WACC is the rate that a company’s shareholders expect to be paid on average to finance its assets, and it is the overall required return on the firm as a whole. Therefore, company directors often use WACC to determine whether a financial decision is feasible or not. In this case, I will choose 9.38% as discount rate. The reason why I choose 9.38% as discount rate is because the estimated Debt/Equity is 26% under the assumptions by CFO Sheila Dowling, which is most close to 25% of Debt/Equity from the projected WACC schedule. There might be some flaws existing by using WACC as discount rate. As we know, the cost of debt would be raised significantly as the leverage increased. The investment will definitely increase the firm’s current debt. So, the cost of debt would not keep at 7.75%.

Then we can use the following formula to calculate the WACC. The cost of debt is taken to be on an after tax basis to further to account for the depreciation tax shield.

Finally we calculate the WACC. The formula is leveraged beta * (cost of capital) + Debt to capital * (cost of debt) * (1-tax rate). Then we get for the U.S. WACC= 6.48% and for Pakistan WACC= 15.93%.

1. How would you describe HPL and its position within the private label personal care industry?

Calculating a firm’s cost of capital has always been a key issue in financial management. To tackle this issue, WACC is one of the most widely used formulas even though the process is difficult, and results seem ambiguous. However, it is clear that WACC is the average cost of capital the firm must pay, in this case Home Depot (HD), to all its investors, both debt and equity holders. Since HD has debt to the tune of $29.6 billion (2012), it means that rwacc is an average of its debt and equity cost of capital. Based on the limiting factors revealed on the page 5, our confidence level in HD’s WACC is moderate. Nevertheless, since HD’s WACC is 5.97% it means that the company should only invest in projects

WACC= (%of debt) (after-tax cost of debt) + (% of preferred stock)(Cost of preferred stock) + (% of common equity) (Cost of common equity)

WACC = Cost of Debt X proportion of debt + Cost of Preferred Stock X Proportion of preferred stock + Cost of equity X proportion of equity

Lastly, the interest rate was calculated by dividing interest expense by long-term debt for the company. These numbers, along with equity and debt data given to us in the case, resulted in a WACC of 13.89%.

At first, WACC and CAPM was attempted to be used as a source of cost of capital. However, for WACC, there is no available proportion of debt and cost of debt for MW. For CAPM, no available data seems to support the acceptable

Our WACC is almost constantly these years – around 5.50% -- via from 5.04% to 5.82%. We also use the scenario analysis for how the WACC and growth rate affect enterprise value and equity value.

Thus the WAVG Cost of Debt (including L/T debt and preferred stock) = rd = 8.633%

The Hassane II mosque is the largest mosque in Africa, and it was built in 1993 by King Hassan II, who gave it his name. It is located in Casablanca, Morocco; its perfect integration of modern and ancient Islamic artistic traditions. The Hassan II is a gorgeous expression of Islam spirituality, and an elegant example of Moroccan architecture.

1.      How would you describe HPL and its position within the private label personal care industry?

Marriott uses WACC to measure the opportunity costs of capital of investments with similar risks. Each division of Marriott has a different cost of capital, based on debt capacity, debt cost, and equity cost. They use the estimate of cost of capital to determine the fraction of debt that should be floating rate debt. WACC is also used to determine the premium above government bond rates for their unsecured debt. This makes sense because the

This case is about P&G Inc., which is one of the most successful consumer goods companies in the world. The P&G community consists of nearly 98,000 people working in almost 80 countries worldwide. What began as a small, family-operated Soap and Candle Company now provides products and services of superior quality and value to consumers in 140 countries. Scope was introduced in 1967 by Procter & Gamble, which is one of the most successful companies in the world. P&G philosophy is to provide superior quality and value