Principles of Corporate Finance

After Tax WACC Example - Sangria Corporation - continued The company would like to invest in a perpetual crushing machine with c ...

After Tax WACC w Preferred stock and other forms of financing must be included in the formula.      +  ×      +  ×  ...

After Tax WACC Balance Sheet (Market Value, millions) Assets 125 50 Debt 2550 Preferred EquityCommon Equity Total assets 125 125 ...

Tricks of the Trade w What should be included with debt? ËLong-term debt? ËShort-term debt? ËCash (netted off?) ËReceivables? ËD ...

Tricks of the Trade w How are costs of financing determined? Ë Return on equity can be derived from market data. Ë Cost of debt ...

Historical WACC 0 5 10 15 20 25 30 196519681971197419771980198319861989199219951998 Cost of Equity WACC Treasury Rate Percent ...

WACC vs. Flow to Equity ËIf you discount at WACC, cash flows have to be projected just as you would for a capital investment pro ...

WACC vs. Flow to Equity Ë The company's cash flows will probably not be forecasted to infinity. Financial managers usually forec ...

WACC vs. Flow to Equity ËDiscounting at WACC values the assets and operations of the company. If the object is to value the comp ...

Adjusted Present Value APV = Base Case NPV + PV Impact w Base Case = All equity finance firm NPV. w PV Impact = all costs/benefi ...

example: Project A has an NPV of $150,000. In order to finance the project we must issue stock, with a brokerage cost of $200,00 ...

example: Project A has an NPV of $150,000. In order to finance the project we must issue stock, with a brokerage cost of $200,00 ...

example: Project B has a NPV of -$20,000. We can issue debt at 8% to finance the project. The new debt has a PV Tax Shield of $6 ...

example: Project B has a NPV of -$20,000. We can issue debt at 8% to finance the project. The new debt has a PV Tax Shield of $6 ...

Miles and Ezzell       + + = − D D c r r WACC r Lr T 1 1 ...

u Spotting and Valuing Options Principles of Corporate Finance Brealey and Myers Sixth Edition Chapter 20 ...

Topics Covered w Calls, Puts and Shares w Financial Alchemy with Options w What Determines Option Value w Option Valuation ...

Option Terminology Call Option Right to buy an asset at a specified exercise price on or before the exercise date. ...

Option Terminology Put Option Right to sell an asset at a specified exercise price on or before the exercise date. Call Option R ...

Option Obligations Buyer Seller Call option Right to buy asset Obligation to sell asset Put option Right to sell asset Obligatio ...