User Account

All Pages

Cost of equity and weighted average cost of capital

Assignment Help Finance Basics
Reference no: EM131546230

Natref is looking into the acquisition of Marine Oils. Marine Oils has 1 (one) million shares outstanding and a target capital structure of 30% debt, its beta is 1.4. Marine Oils has R10.82 million in debt trading at par value and pays 8% interest. Marin Oils free cash flow (FCFo) is R2 million per year and it is expected to grow at constant rate of 5% a year. Marine Oils pays 40% corporate tax. The risk free rate of interest is 5% and the market risk  premium is 6%. Natref needs to estimate intrinsic value of Marine Oils before making a final decision on this proposed acquisition.

  1. What are Marine Oils' cost of equity and weighted average cost of capital?
  2. What is Marine Oils' intrinsic value of operations?
  3. What is the current intrinsic value of Marine Oils' stock?

Reference no: EM131546230

Questions Cloud

Analyze how this application lends itself to a solution : Analyze how this application lends itself to a solution that is superior to that offered by one of the ethical theories that you did not select.
The 10 tell-tale signs of deception : One of our reading for this week is "The 10 Tell-Tale Signs of Deception." Imagine you are interviewing someone you suspect of committing a fraud.
Calculate mitsubishi cash conversion cycle : Calculate Mitsubishi's cash conversion cycle. Assuming Mitsubishi holds negligible amount of cash and market securities, calculate its total assets turnover.
What is the gamma of a share : What is the gamma of a share of stock if the stock price is $55, and a $50 call on the stock is priced at $7 while a $50 put is priced at $4?
Cost of equity and weighted average cost of capital : What are Marine Oils' cost of equity and weighted average cost of capital?
Demonstrate your analytical writing abilities by reading : You will demonstrate your analytical writing abilities by reading/interpreting a Shakespeare play and researching a topic drawn from that play.
Calculate the amount that should appear : Based on the above information, calculate the amount that should appear on Garza's balance sheet at December 31, 2010, for inventory.
Propose a type of message appeal to be used in advertising : Propose a type of message appeal to be used in the advertising, making sure to explain the rationale behind the appeal.
What are ten rules of e marketing : What are ten rules of E marketing - not more than 2 pages

Reviews

Write a Review

Finance Basics Questions & Answers

  Describe the part of the biosphere where humans can survive

Describe the part of the biosphere where humans can survive

  Differing types of control

Identify ways in which management control may be enacted, drawing upon differing types of control, and analyzing their strengths and weaknesses. In so doing refer to the implications for styles of management, and for performance systems. (Use no m..

  Calculate the npv of the investment

The Metallica Heavy Metal Mining (MHMM) Corporation wants to diversify its operations. Calculate the NPV of the investment.

  State the terminology used to identify the fra in which the

a corporate treasurer needs to hedge the risk of the interest rate on a future transaction. the risk is associated

  Which alternative would offer hankla higher expected return

Assume that the market's required return in five years is forecasted to be 11 percent. Which alternative would offer Hankla a higher expected return (or yield) over the five-year investment horizon?

  What is the net present value of the refunding

Today15 year five percnt seminannual payment bonds can be sold at par but foltation costs on this issue would be two percent. what is the net present value of the refunding.

  What are issues that are involved with idea of moral hazard

What are the issues that are involved with the idea of moral hazard? What are the eight basic facts that support the reason for having financial institutions?

  Find annual interest on your investment

Consider you're starting from zero now and you earn 10% find annual interest on your investment

  What is the over-the-counter market for derivatives

How might over-the-counter trading of derivatives result in risks to the broader system?

  Context of government bonds

Find an article that discusses the European debt crisis in the context of government bonds. Briefly review the article and then comment.

  Discuss the pros and cons of using the past performance

Discuss the pros and cons of using the past performance of stocks and bonds as a means of predicting future performance, and make at least one recommendation for making this technique more accurate.

  Relationship between employee satisfaction

The two hypothesis are (H0) there is no relationship between employee satisfaction (DV) and pay (IV), or (H1) there is a relationship between employee satisfaction (DV) and pay (IV).

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd