Case 26 - Star River Electronics Ltd.

The comptroller currently finds the weights for the weighted average cost of capital (WACC) from information from the balance sheet shown in Table 2. Compute the book value weights that the comp­trol­ler currently uses for the company’s capital structure.

The cost of equity was found using CAPM, with the given market risk premium of 5%, a beta of .88, and risk-free rate of 4.03%. The beta was found by running a regression of Southwest’s percent change in stock price versus the S&P 500’s percent change in stock price for two years (June 28, 2000 to June 28, 2002). The risk-free rate was the return on a ten-year treasury note issued on June 28, 2002, according to the U.S. Treasury’s website. The tax rate of 39% was used to account for tax savings from leverage. In order to calculate the firm’s leverage, the market value of equity was found from the price per share on July 24, 2002 (Yahoo Finance) and the shares outstanding on the balance sheet of the July 10-Q report, as shown in Exhibit X. The debt value was approximated at the book value since data could not be found regarding its market value. This analysis resulted in a debt weight of 11.74% and equity weight of 88.26%. The final approximation for the weighted average cost of capital was 8.64%.

On 6/2/16 at about 7:30 PM, RAD 1 associate Christopher Veizaga (veizaga) asked security if he would be able to leave out of the B building bypass with a large box. The box contained 17 TC-55 also known as dolphins. Shift Supervisor (S/S) Enmanuel Cabrera then asked Mr. Veizaga, why exactly did he have to remove the box out of the building? Mr. Veizage stated that it was a last minute shipment to another site and did not think that he needed to put an asset removal form because it is not product. S/S Cabrera quickly spoke with Operation Manager (O/M) Thomas Gerlach about the situation at hand. O/M Gerlach stated to let the gentlemen leave with the box but to just document the individual’s information and take pictures of the content of

The first step in the analysis was to categorize each patient by whether or not they passed the clinical threshold during their treatment and if their change was reliable. Clinical cutoff scores and Reliable Change Indexes (RCI) for the PHQ-9 and GAD-7 were obtained from past research [@Delgadillo2012; @Griffiths2015; @Kroenke2001; @Spitzer2006]. Clinical cutoff scores for the BASE-6 were obtained from unpublished pilot research and corresponded to the clinical cutoff of the commonly used OQ-45 measure.

The mixture of debt-equity mix is important so as to maximize the stock price of the Costco. However, it will be significant to consider the Weighted Average Cost of Capital (WACC) as well so that it can evaluate the company targeted capital structure. Cost of capital (OC) may be used by the companies as for long term decision making, so industries that faced to take the important of Cost of capital seriously may not make the right choice by choosing the right project(Gitman’s, ).

1. Determine the Weighted Average Cost of Capital (WACC) based on using retained earnings in the capital structure.

Star's returns were found by multiplying the EPS times the P/E ratio to get the year's stock price. I then found the change in the price each year, which is the capital gain yield (CGY). Adding this, the CGY, to the dividend yield (also listed in exhibit 6) gave Star's returns. The results of the regression were a best fit line with a slope of 0.831, which equals beta. Using exhibit 5, I averaged the 10 and 20 year T-bill rates to get "Rf" for 15 years of 10.7%. I used the given 6.0% percent as the market premium. Putting all of these values into the CAPM equation gave a return on equity of 15.69%.

The $19,750 engineering Service Fee was included Property Premium presented in the Executive Summary. For your convenience, here is the premium breakdown (not including taxes and fees):

Inventories are a staggering 60% of sales and are full of soon to obsolete inventory. It is possible that this inventory of cds will not be able to be sold at full retail value with the growth of the dvd market. Perhaps more important to the current financial outlook, as

The existing customers of A/S base of Small & Mid Sized original equipment manufacturers (OMEs) accounted for 56% of sales in 1996. The second market is the Contract Manufacturers (CM) accounted for 20%. The two other major customer segments are the PC Clones (X86s) with the market share of 11%.

WACC = rD (1- Tc )*( D / V )+ rE *( E / V )

for the same. Due to pressure on PC producers by consumers to offer lower prices, the

Star River Electronics (SRE) was a joint venture company between Starlight Electronics Ltd., and an Asian venture-capital firm, New Era Partners. The company was based in Singapore, and was engaged into the manufacturing of CD-ROMs which it supplied to major software companies.

14. WACC – Table 19.4 shows a simplified balance sheet for Rensselaer Felt. Calculate this company’s weighted-average cost of capital. The debt has just been refinanced at an interest rate of 6% (short term) and 8% (long term). The expected rate of return on the company’s shares is 15%. There are 7.46 million shares outstanding, and the shares are trading at $46. The tax rate is 35%.

Weighted Average Cost of Capital is the weighted Average of the Marginal Costs of the Capital Components employed to acquire a long term asset (make a new real investment in things like Plant and Equipment, R&D, Human Capital, a new Product, a new