Target Corp. Weighted Average Cost of Capital
According to the consolidated balance sheet on January 30, 2010 (exhibit 1), the total amount of debt, including shortterm and longterm debts and other current liabilities was at $16.814 billion. Account Payable is excluded from the WACC’s debt component because it is not a source of funding that comes from …show more content…
Given these approximations, the CAPM model would total the riskfree rate and the market risk premium times beta to arrive at a cost of equity of 9.68%, which reflects the investors’ expected return from investing in shares of the company.
According to the company’s annual report in 2009, the Federal statutory tax rate is 35%. Along with the above analysis, we have gathered all the key information necessary to estimate the WACC as following: Debt proportion  31.7%  Cost of Debt  5.06%  Corporate

Weighted Average Cost of Capital Analysis of Bendigo Bank
880 Words  3 PagesBendigo Bank Analysis WACC Analysis (Question 2) The decision to choose the issuance of preferred shares or unsecured notes is balanced not only by the cost of the capital to the bank, but also the characteristics of the instruments themselves. Issuing preferred stock may be advantageous to the current firm's management due to its unique characteristics over ordinary stock, as well as its hybrid status as a financing instrument. Preferred stock is enticing to investors since it is senior…

Weighted Average Cost of Capital and Yeats
1737 Words  7 Pageson important aspects of the Yeats Valves case. Note the actual case name is Yeats Valves and Controls, Inc. The case number is UV0094. There is also a spreadsheet  that number is UV0184. As mentioned  the corresponding case is TSE International Corp.  case # UV0114. 1. What is the situation that this company faces? Yeats Valves and Controls, Inc. is currently considering a merger with TSE International Corporation. The founder, who is Chair and CEO, W.B. “Bill” Yeats, is about to reach his…

Calculating the Weighted Average Cost of Capital
292 Words  1 PagesIn order to calculate the weightedaverage cost of capital, the first step is to identify the total capital, and then place the different elements of the capital structure into either debt or equity, and in this case leases as well. Thus, Microsoft has a total of $3120 million in capital ($950 debt + $20 leases + $500 preferred + $900 common + $750 retained earnings). The preferred, common and retained earnings will all be treated as equity. This gives us the following weightings: 30.4% debt;…

Weighted Average Cost of Capital
1766 Words  8 Pagescalculations used to determine the weighted average cost of capital (WACC). This SLP calculates the WACC for my SLP company – McDonalds, discusses how those calculations were arrived at and briefly describes WACC and what investors use it for. COMPANY NAME: McDonalds Inc Balance sheet date: 31 DEC 07 Market values date: 1 SEP 08 SOURCE BOOK VALUE MARKET VALUE PROPORTIONS COST (%) PRODUCT (a) (b) (c)…

The Concepts of Weighted Average Cost of Capital and Marginal Cost of Capital
679 Words  3 Pagesbetween the concepts of weighted average cost of capital and marginal cost of capital. We have seen that the weighted average cost of capital is the basis for the 10% discount rate that was used to evaluate the project. The weighted average cost of capital reflects the firm's cost of capital, and that includes both debt and equity. This is a more accurate figure to use in the calculation of a project's value than the marginal cost of capital. The marginal cost of capital is the cost to the firm of an…

Marriot Corp: Cost of Capital
2528 Words  11 Pagesdivisionslodging division, restaurant division and contract service division. Marriott uses Weighted Average Cost of Capital (WACC) as the hurdle rate, and use it to discount the appropriate cash flows when evaluate an investment project. Our goal is to determine the WACC at every division base on the information that the case has provided. First of all, we will determine the cost of debt, cost of equity and the capital structure for the whole company. Then we will compute for the tax rate, and calculate…

Weighted Average Cost of Capital and Marriott Corporation Essay example
1843 Words  8 Pagesdividend in December? Marriott Corporation (Cost of Capital) 1. Are the four components of Marriott’s financial strategy consistent with its growth objective? 2. How does Marriott use its estimate of its cost of capital? Does this make sense? 3. What is the weighted average cost of capital for Marriott Corporation? a. What riskfree rate and risk premium did you use to calculate the cost of equity? b. How did you measure Marriott’s cost of debt? 4. What type of investments would…

Weighted Average Cost of Capital and Single Hurdle Rate Essay
665 Words  3 PagesServices divisions. The hurdle rate is the cost of capital based on an estimate of the corporation’s WACC. 2. Please estimate the segment WACCs for Teletech (see the worksheet in case Exhibit 1). As you do this, carefully note the points of judgment in the calculation. Corporate Telecommunications Products & Systems MV asset weights 100% 75% 25% Bond rating A/BBB+ A BB Pretax cost of debt 5.88% 5.74% 7.47% Tax rate 40% 40% 40% Aftertax cost of debt 3.53% 3.44% 4.48% Equity beta…

Weighted Average Cost of Capital and Common Stock
3754 Words  16 PagesCHAPTER 9 THE COST OF CAPITAL (Difficulty: E = Easy, M = Medium, and T = Tough) Multiple Choice: Problems Easy: Cost of common stock Answer: d Diff: E [i]. Bouchard Company 's stock sells for $20 per share, its last dividend (D0) was $1.00, and its growth rate is a constant 6 percent. What is its cost of common stock, rs? a. 5.0% b. 5.3% c. 11.0% d. 11.3% e. 11.6% Cost of common stock Answer: b Diff: E [ii]. Your company 's stock…

Finance: Weighted Average Cost of Capital and Market Risk Premium
1165 Words  5 PagesCost of Capital questions and practice problems Questions 1. What does the WACC measure? 2. Which is easier to calculate directly, the expected rate of return on the assets of a firm or the expected rate of return on the firm’s debt and equity? Assume you are an outsider to the firm. 3. Why are marketbased weights important? 4. Why is the coupon rate of existing debt irrelevant for finding the cost of debt capital? 5. Under what assumptions can the WACC be…
More about Target Corp. Weighted Average Cost of Capital

Weighted Average Cost of Capital Analysis of Bendigo Bank
880 Words  3 Pages 
Weighted Average Cost of Capital and Yeats
1737 Words  7 Pages 
Calculating the Weighted Average Cost of Capital
292 Words  1 Pages 
Weighted Average Cost of Capital
1766 Words  8 Pages 
The Concepts of Weighted Average Cost of Capital and Marginal Cost of Capital
679 Words  3 Pages 
Marriot Corp: Cost of Capital
2528 Words  11 Pages 
Weighted Average Cost of Capital and Marriott Corporation Essay example
1843 Words  8 Pages 
Weighted Average Cost of Capital and Single Hurdle Rate Essay
665 Words  3 Pages 
Weighted Average Cost of Capital and Common Stock
3754 Words  16 Pages 
Finance: Weighted Average Cost of Capital and Market Risk Premium
1165 Words  5 Pages