hamad (1) - CAPITAL BUDEGTING OF AAIS ATHLETIC SHOE SALE...

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CAPITAL BUDEGTING OF AAI’S ATHLETIC SHOE SALE PLAN BASED ON PROXY WACC CALCULATED USING VARIUOS MARKET VARIABLES RISK FREE RATE The risk free rate has been taken from the yield curve of US treasury bonds that have a maturity period Of 30 years. The risk free rate is 3.26% http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield BETA Particular Nike Callaway Golf Co Adidas Beta 1.02 1.41 0.99 Debt equity 0.05 - 0.35 Unlevered beta 1.41 0.73 Average unlevered beta 1.07 Nike Levered Beta 1.13 http://finance.yahoo.com/q/ks?s=nke MARKET RISK PREIMUM The market risk premium is the extra rate of return that is received over and above the risk free rate of return. We have taken the historical risk premium of 7% for our calculation. As per CAPM model, the required rate of return for equity is as follows: Re = Rf + βx(Rm – Rf) = 3.26% + 1.13 x 7.00% = 11.14%
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YTM OF BONDS Bond outstanding as on May 31, 2011 Debt outstanding (million) Interest rate
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This note was uploaded on 12/04/2011 for the course ECONOMICS 201 taught by Professor Rcollier during the Spring '10 term at Portland CC.

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hamad (1) - CAPITAL BUDEGTING OF AAIS ATHLETIC SHOE SALE...

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