https://www.youtube.com/watch?v=nLjFTHTgEVU&feature=emb_title

 

Watch from 15 minute mark to 31:41 of Google Analytics video. Address the questions that follow:

1. What are the implications of metrics to performance management?
2. What are your key learnings from this portion of this video?

 

Two paragraph for each question

 

WACC Project

Service Type:     Writing From scratch

Paper Type:        1#Assignment

Client ID:              7916

Subject:               Finance

Pages    3 (900 Words)

Sources                0

Orders related

Spacing Double

PowerPoint Slides           0

Charts   0

Extra Requirements:

Citation                APA

 

 

Your task is to select a company and calculate the capital structure that minimizes WACC and thus maximizes firm value. I have attached some PowerPoint to help.

 

 

Final Major WACC Project

 

 

 

Review the Final Major WACC Project Guidelines for instructions on completing this assignment.

 

Consider the following simple rules of observation to help determine the final results:

 

• If the Beta coefficient and the required rate of return on common equity is not increasing constantly as the amount of debt in the structure moves from 0% to increasing levels of debt, something is wrong.

 

• If the cost of debt does not fall and then begin to increase as the risks of bankruptcy increase, something is wrong.

 

• If the WACC curve does not display some type of U-shaped form (Note: You may have to make the vertical percentage cost scale have very small increments to show this.), something is wrong.

 

Format your final submission according to APA standards, and include reference and cover pages.

 

 

 

Background: 

• Reference Brigham, Eugene F., and Ehrhardt, Michael, C., Financial Management, Theory and Practice, 14^thEdition (2013). Chapter 15, Formula (15-2, p. 591), Hamada equations (15-9, 15-10, pp.610-611), & the process described on pages 608 through 614, plus graph on page 612 (Figure 15-7) are the “keys” to trying to determine the “optimal WACC.”

 

• The precise identification of the firm’s optimal capitalization structure is difficult, and depends a great deal on judgment of corporate officials and investment experts, as well as on the quality of data used in numerical calculations. Bottom-line is: onlyyour study team can possibly know the “optimal WACC” for your selected company…and, it may not make that much of a difference in maximization of stockholder wealth from today’s “target WACC.”

 

Assumptions/”Givens”

• For the purpose of the project, assume no preferred stock.

 

• Similar to the textbook on pages 608-611, we will assume a zero percent (0.0%) growth rate in your company. (Otherwise, you will have to figure out future capital investments, and make adjustments in the “free cash flow (FCF)” calculations).

 

• For your target WACC, you will have determined what today’s cost of debt is for your company (usually, from existing corporate balance sheets or annual reports, or both). Now, for lower or higher amounts of debt, you have to (somehow) determine the costs of debt as the debt/equity ratio is changed. The textbook (Table 15-5, p. 610) illustrates this process for you. Rather than each team having to spend a lot of time visiting/calling bankers, we will use the following as “givens” for you:

 

• For each decrement or increment of 10% from your targetratio of debt and the corresponding debt costs, the debt costs decrease/increase by 10% from the target.
• For each decrement or increment of 20% from your targetratio of debt and the corresponding debt costs, the debt costs decrease/increase by 25% from the target.
• For each decrement or increment of 40% from your targetratio of debt and the corresponding debt costs, the debt costs decrease/increase by 60% from the target.

Example:

Assume the study team finds that Major Toy Company has a “target” debt/equity ratio of $100M / $400M = 25%, and that the current market costs of debt for Major (or a similar same size company with the same S&P/Moody’s Bond Ratings) are found in the annual reports/balance sheets to be 8%.

 

Thus, using the decrement/increment guidelines above, you will have:

 

 

Debt/Equity Ratio (% financed with debt)                                                Costs of Debt (r_d)

5% ———————–   lower target rate by 25% ——————————————       6.0%

15% ———————    lower target rate by 10% ——————————————       7.2%

25% ———————    target WACC debt costs found by team (before tax) ——–      8%

35% ———————    increase rate by 10%     ———————————————    8.8%

45% ———————    increase rate by 25%     ———————————————    10.0%

65% ———————    increase rate by 60%     ———————————————    12.8%

• Corporate (federal+state+local) tax rate.

 

 

 

If you cannot readily determine what T value is (so that you can use it to calculate r_d), then use our standard 40% tax rate!

(As an example) At this point, then, you can make this table:

% of Debt in Capitalization Structure	Cost of Debt	** After-Tax Cost of Debt	Beta Coefficient	Common Stock Cost	WACC
5%	6.0%	3.60%
15%	7.2%	4.32%
25%	8% *	4.8%
35%	8.8%	5.28%		To be         filled in             by           next        sections!
45%	10.0%	6.00%
65%	12.8%	7.68%

** Determined by multiplying the (before-tax) cost of debt by (1- the tax rate found for the company).  I’m assuming T = 40% for this illustration.

 

• For use in determining owner’s equity costs for retained earnings at the “target” capitalization ratio to get r_s(if you need to…you can always find the Beta coefficient from the financial web pages for just about any company) from the CAPM formula, you can use r_RF = 4%, and market risk premium of 8% if you cannot determine them from financial sources. (Note: however, most study teams in the past have been able to find and logically support figures for these key parameters).

 

 

 

For example, assume your study team finds a Beta of 1.3 for Major Toy Company, effective December 31, 2006 to match the 25% debt cost of 8% at the same time (December 31, 2006). Then, r_s (for target capitalization structure) =  4% + 1.3(8%) = 4% + 10.4% = 14.4%

 

Thus, for the “target capitalization” structure, the “target WACC” =

 

WACC = w_d (r_d)(1-T) + w_s (r_s)

= 0.25(8%) (1-0.4) + 0.75 (14.4%)

= 0.25 (4.8%) + 0.75 (14.4%)

COMPLETION OF MATRIX

= 1.2% + 10.8% = 12.0%

 

 

• Given the Beta and the 25% debt target ratio that the study team is presumed to have determined for Major Toy Company, the next step is to find what Beta would be if there was zero percent (0.0%) debt. This is called the “un-levered beta” and is found by equation 15-10 on page 623 (the Hamada equation) – take the Beta = 1.3 at 25% debt:

 

bu = b / [1 + (1 – T)(D/S)]

= 1.3 / [1 + (0.6)(25 / 75)

= 1.3 / 1 + 0.2

= 1.3 / 1.2

= 1.08

 

 

 

• Now that you know bu, you can find all the other Beta coefficient levels of debt in the structure, by using equation 15-9: b = bu [1 + (1 – T)(D/S)] = 1.08 [ 1+ (0.6)(D/S)]

 

% of Debt in Capitalization Structure	Beta Coefficient	rs (Using CAPM)
0%	1.08% **	rs = rRF + B(mrp) = = 4% + 1.08(8%) = 12.64%
5%	1.08(1+ 0.6(5 / 95) = 1.11	rs = rRF + B(mrp) = = 4% + 1.11(8%) = 12.88%
15%	1.08(1+ 0.6(15 / 85) = 1.19	rs = rRF + B(mrp) = = 4% + 1.19(8%) = 13.52%
25%	1.3 *	rs = rRF + B(mrp) = = 4% + 1.3(8%) = 14.4%
35%	1.08(1+ 0.6(35 / 65) = (1.08)(1.323) = 1.43	rs = rRF + B(mrp) = = 4% + 1.43(8%) = 15.44%
45%	1.08(1+ 0.6(45 / 55) = (1.08)(1.491) = 1.61	rs = rRF + B(mrp) = = 4% + 1.61(8%) = 16.88%
65%	1.08(1+ 0.6(65 / 35) = (1.08)(2.114) = 2.28	rs = rRF + B(mrp) = = 4% + 2.28(8%) = 22.24%

* Determined to be 1.3 for Major Toy Company at target debt/equity ratio.

** Un-levered Beta determined by Hamada equation.

 

 

 

FINAL WACC CALCULATIONS

 

 

 

% of Debt in Capitalization Structure	(rd) After-Tax Cost of Debt (%)	rs (%)	WACC = wd (rd)(1-T) + ws (rs) (%)
0	N/A	12.64	= 0 + 100(12.64) = 12.64
5	3.60	12.88	= 0.05(3.60) + .95(12.88) = 12.42
15	4.32	13.52	= 0.15(4.32) + .85(13.52) = 12.14
25	4.8	14.40	= 0.25(4.80) + .75(14.40) = 12.00
35	5.28	15.44	= 0.35(5.28) + .65(15.44) = 11.89
45	6.00	16.88	= 0.45(6.00) + .55(16.88) = 11.98
65	7.68	22.24	= 0.65(7.68) + .35(22.24) = 12.78

 

 

 

CONCLUSIONS

 

 

 

 

• The “target capitalization structure” at 25% debt is NOT the optimal capitalization structure!
• According to the data provided (and assumed), the optimal capitalization structure is at a 35% debt / 65% equity ratio, with the WACC at the lowest level of 11.89%.
• Refer to the following graph:

 

2

 

4

 

6

 

8

 

10

 

12

 

14

 

16

 

18

 

0.00

 

0.10

 

0.20

 

0.30

 

0.40

 

0.50

 

0.60

 

0.70

 

0.80

 

0.90

 

1.00

 

% of Debt in Structure

 

“Optimal WACC” at debt level of 35%

 

Initial “target WACC” at debt level of 25%

 

• Stockholder wealth maximization theories require that Major Toy Company immediately move from 25% to 35% debt levels…become more financially leveraged in order to maximize wealth to the stockholders.

 

Please answer those question and explain very detail. Answer those question like a small assignment (1-2 paragraphs for each question)

This is a leadership course, so answer like in a leadership way.

1. Compare and Contrast a work group, a team, and a self-managing team in terms of power, leadership, decision making and activities or tasks. Then can you provide an example of each of these categories (workgroup, a team, a self-managing team) and share how power/ leadership/ decision making and activities are played out in these examples?
2. What are the three criteria used to define team success? Can you after you define these characteristics of team success, provide specific examples from real teams and groups and how they have defined success or pursued success? What are the potential problems with defining success in these three ways, or some of the benefits of these definitions?
3. What are the five characteristics of successful teams? How have researchers investigated these characteristics?
4. Explain the value and characteristics of effective team goals.
5. Please list the five stages of group development. Then please pick two of those stages and provide suggestions to leaders of how they would help the group or team navigate through these specific stages.
6. Explain Social loafing and how to reduce it.
7. Explain why group cohesion is important and how to build it? What would you do as a leader to foster a more dynamic group cohesion? Can you provide specific examples and details of what you would do to develop strong group cohesion?
8. What are some benefits and problems related to both cooperation and competition within a team, or group? As the leader how can ensure that you are maximizing the benefits, so that cooperation and competition enhance the team or group you are leading? What are some important things a leader must do in order to avoid the problems creating bigger issues for the team? Can you provide a real-life example of how benefits for these two areas (cooperation and competition) have been actualized? Can you provide an example in real life where they have created problems?
9. Name and explain the four components of emotional intelligence.
10. What are the benefits and problems that come with conflict within a team? After you discuss this, please then provide an example on a current team, or from your experience where the benefits are seen, and then the same for problems that conflict created within a team. Then, please list a few ways in which you as a leader can prepare, manage and steer conflict to be beneficial and not damaging.
11. Compare and contrast personal/soft power with positional power. Which is more effective?
12. When are group decisions superior to individual decisions?

 

 

Initial Post (at least 150 words)

In Chapter 3, Jones surveys several international border issues (Israeli-Palestine border; India-Pakistan-Bangladesh borders; Bangladesh-Myanmar border;  Australian border).  Explain the situation at one of these borders and include any significant or problematic details, facts, examples, and/or statistics that Jones reveals. Add on to Jones’ explanation of the issue by researching additional information on the same border situation to include any updated facts or evolving events that capture how the issue at this border has evolved from 2016 to today. (Make sure to include page numbers if you quote from Jones, and make sure to use the toolbar to link in the URL to your research; you can also use the toolbar to embed any images or videos that you referenced. See Helpful Canvas Guides below).

Reply to Two Posts (50 words for each)

For your two replies, focus on different borders than the one your initial post discussed.

Acknowledge the significance (and accuracy) of the information presented by your peers and add on to their work by relating additional details about the border issue discussed (or one that shares similar concerns). Details of your response can come from the book and/or your own research. (Use the toolbar to link in the URL to any sources you use; you can also use the toolbar to embed any images or videos that you referenced. See Helpful Canvas Guides below).

Important Requirement: focus on a different border for each of your replies (don’t talk about the same one for both replies).