Marriott Corporation: The Cost
of Capital
FINA 3301 Section 2
Spring 2013
Nicholas Lara
Charles Jung
Juan Villaamil
Marriott Corporation: The Cost of Capital
The four components of Marriotts financial
Homework One
Prof. Gu (FINA2201)
Topic One: Annuity
Q1 Annuity
Find the present value of $1000 deposited at the end of each year for 10
years, into an account that pays interest @ 12% per year, compou
Valuing Capital Investment
Projects
FINA 3301 Section 2
Spring 2013
Nicholas Lara
Charles Jung
Juan Villaamil
Valuing Capital Investment Projects
1) Growth Enterprises Inc.
1) A. Refer to Exhibit 1
B.
Atlantic Corporation Case
Study
FINA 3301 Section 2
Spring 2013
Nicholas Lara
Charles Jung
Juan Villaamil
Atlantic Corporation
1)
Assuming that the price of linerboard per ton reflects the current est
Cash flow estimation
1. Ford Motor Company is considering launching a new line of hybrid diesel-electric SUVs. The
heavy advertising expenses associated with the new SUV launch would generate operatin
Chapter 2:
Standard deviation: how far above or below the expected value the actual value is like to be
Chapter 6:
Operating current asset: the short-term assets normally used in a companys operating
Chapter 2:
Standard deviation: how far above or below the expected value the actual value is like to be
Chapter 6:
Operating current asset: the short-term assets normally used in a companys operating
Chapter 7:
Current ratio: current assets/current liabilities
Quick ratio:(current assets-inventories)/current liabilities
Asset management ratio measure how effectively a firm is managing its assets
I
<Previous test review>
>Factors that will increase AFN: Increase dividend payout ratio; firms forecasted sales r
unexpectedly increased; inventory turnover decrease, no effect on sales forecast.
>Nike
Term
Tax
Cost of Debt
(Before Tax)
Symbol
t
Definition
Calculation
0.00%
Kd
Yield to maturity on
company's bond
0.00%
Cost of Debt (After
Tax)
Kd
Kd*(1-T)
Cost of Equity
Ke or Ri
Using CAPM = Rf + (Rm
What is a Poison Pill
A legal contract giving target
company shareholders certain
rights under specific
circumstances
1
Types of Pills (1)
Flip Over
Gives target shareholders the right
to buy shares
Index to Handouts (revised July 2010)
This wookbook contains the following exhibits
Valuation Models
Discreet CF's
Constant CF's
Constant Growth CF's
Mixed, i.e. discreet CF's + constant growth termin
Index to Worksheets in this File
1 Steps in Valuation
2 Valuation Models
Discreet CF's, Constant, Constant growth, super growth + constant)
Contains practice problems
3 Free Cash Flow
4 Cost of Capita
CASH IS KING!
Suggested Topics to Review for Final Exam
Assumptions in financial forecasting, modeling, and valuation
Why forecasts Fail Taking forecasting with a grain of salt
o Accurate forecasts ar
A Survey on Post-earnings announcement drift
(PEAD)
Lisheng Yu
AbstractThis paper summarizes and analyzes the empirical
literature on PEAD which has been documented repeat. When
viewed as a whole, the
Market Efficiency
- The efficient market hypothesis assumes that all relevent and publicly available information about a firm is quick
Ravenscraft (1)
There is no value created through M&A activity
2
Chapter 11:
CAPM(capital asset pricing model): Rs=Rrf+Bi(RPm)
CAPM: the cost of common equity=risk-free rate+beta coefficient*(market risk premium)
Beta,bi=(stock standard deviation/market standard d
Chapter 12
Capital budgeting is the whole process of analyzing projects and deciding which one to accept
and thus include in the capital budget.
Reasons to invest: replacement, expansion (same market)
Chapter 10:
Agency conflicts: a conflict of interest whenever owners authorize someone else to act on
their behalf as their agents.
The primary agency relationships are: 1) stockholders and creditors,
Chapter 2: Time Value of Money, Annuities and Perpetuities
Future Value = FV = PV(1+r)n
o n = number of periods
o r = rate of return per period
Present Value = PV = FV/(1+r)n
Money has changing value