What is oililys wacc in the french market

Assignment Help Financial Accounting

Reference no: EM131139719

Find Oilily's WACC under each of the following scenarios:

a. Oilily has a market value debt-to-value ratio of 40 percent. Oilily's pretax borrowing cost on new long-term debt in France is 7 percent. Oilily's beta relative to the French stock market is 1.4. The risk-free rate in France is 5 percent and the market risk premium over the risk-free rate is 6 percent. Interest is deductible in France at the marginal corporate income tax rate of 33 percent.

What is Oilily's WACC in the French market?

b. Oilily can borrow in the Europound market at a pretax cost of 6 percent. International investors will tolerate a 50 percent debt-to-value mix. With a 50 percent debt-to-value ratio, the beta of Oilily is 1.2 against the MSCI world index. The required return on the world market portfolio is 12 percent.

What is Oilily's WACC under these circumstances?

c. Suppose Oilily is expected to generate after-tax operating cash flow of CF1 = 10 million in the coming year and that this is expected to grow at 4 percent in perpetuity. The valuation equation V0 = CF1/(i - g) can value Oilily's cash flow stream given CF1 is the coming year's cash flow, i is the WACC, and g is the growth rate of annual cash flow.

Find the value of Oilily using the WACCs from the scenarios in parts a and b.

Reference no: EM131139719

Questions Cloud

Write response using conflict style facework to address : Required a 210 words response using the conflict style facework to address this conflict. The school year calendar has been published, and the annual Winter School Assembly has been listed as the Christmas Program. Some Muslim and Jewish constitue..

Importing knowledge begins with good content organized : Explain the following? statement: "The gifted speaker is the one that can summarize their entire presentation into a few? sentences." Explain the following? statement: "Importing knowledge begins with good content organized in a logical? fashion."

What is the effect of an increase in g on the equilibrium : Characterize the steady-state equilibrium, and show that it is globally stable.

Analyze the four sample elevator speeches : Analyze the four sample elevator speeches from this module. What do they have in common and how are they? different? This exercise is designed to stress the important of trying several different methods of gaining attention. Using your original ideas..

What is oililys wacc in the french market : Oilily has a market value debt-to-value ratio of 40 percent. - Oilily's pretax borrowing cost on new long-term debt in France is 7 percent.- What is Oilily's WACC in the French market?

Which type of punishment deters crime most effectively : Write a 1,050- to 1,750-word paper that summarizes your research results and addresses the following questions: Which type of punishment deters crime most effectively? Do the consequences of punishment provide any benefits for criminals and society?

The national labor relations act : How has the Wagner Act(The National Labor Relations Act) affected the growth of organized labor and how did it contribute to the move from agricultural to industrial unions:

Prepare stonehenge income statement under absorption costing : Prepare Stonehenge"s income statement under absorption costing. - Prepare Stonehenge"s income statement under variable costing.

Geographic boundaries-legal boundaries are based on power : Companies that conduct electronic commerce are NOT subject to the same laws and taxes as other companies. Works copyrighted by corporations or not-for-profit organizations are protected for 95 years. The relationship between geographic boundaries and..

User Account

All Pages