Corporate Finance 9

Corporate Finance 9 - Cost of Capital is Minimal rate of...

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Investment Decision Criteria Wednesday, October 20, 2010 8:05 AM 3 types Revenue enhancing Cost-reduction Government Mandate NPV Inflows-outflows EAC Used when mutual exclusives do not have equal lives Others IRR Nike Case Monday, October 25, 2010 8:00 AM Date: July 2001 Do we think it is a good idea to invest in Nike? Need to estimate Nike's Cost of Capital (ask assistant) Cost of capital figures out discount rate to figure out own value of Nike (how we value it)
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Unformatted text preview: Cost of Capital is Minimal rate of return acceptable on new projects Opportunity cost of capital WAAC: Weighted Average Cost of Capital =kd(1-T)+ws*ke Ks are proportion or percent T is tax rate Assistant's Mistakes Used last years interest expense CAPM Ke 9.8% Rk 5.74 b 0.69 Mp 5.9% DDM not good since dividends stay flat Market value of equity 42.09$x271=11410ish 10/90 D/E...
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Corporate Finance 9 - Cost of Capital is Minimal rate of...

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