Strategic Corporate Finance ASSIGNMENT 2 Essay Example | Topics and Well Written Essays - 2500 words

Strategic Corporate Finance ASSIGNMENT 2 - Essay Example The company had ?1.69 worth net assets per share which has been improved to?1.72 in 2011. b) Cost of Capital The following are the computations in respect of calculating the weighted average cost of capital for Marks & Spencer. The cost of equity of M&S is found to be 4.5% whereas cost of debt is found to be 4%. The overall weighted average cost of capital after accounting for the value of equity and value of debt, is found to be 4.33%. Cost of Equity (CAPM)       Re = Rf + Beta (Risk Premium)          = 0.03 + 0.75 (0.02)       Re = 4.50% Cost of Debt       Rd = Annual Coupon    Current Bond Price          = 5    125       Rd = 4.00% Value of Equity Ve = Current Share Price x No. of Shares outstanding = 3.76 x 1600 = 6016 Value of Debt Vd = Current Bond Price x No. of Bonds Issued = 125 x 2489 = 3111                         100       Weights       Wd = Debt = 3111 = 34.09%    Debt + Equity 3111 + 6016          We = Equi ty = 6016 = 65.91%       Debt + Equity    3111 + 6016       WACC       WACC = [Wd x Rd] + [We x Re]          = [ 34.09% x 4%] + [65.91% x 4.5%]          = 4.33% c) Dividend Growth Model The following is the calculation of theoretical ex-right price by using Gordon’s dividend growth model. ... 7(1+0.02) = 693.6       K – g    0.045 - 0.02       From the above calculations, it can be noted that if the growth rate of dividend is zero, the theoretical ex-right price of the M&S share is around 377 pence. On the other hand, if the dividends are expected to grow at 2%, in that case there will be a massive growth in the share price of M&S such that it is likely to reach at 693 pence which is extremely high. Under the given circumstances, when the current share price id 363 pence, the theoretical ex-right price of 377 pence, seems to be more appropriate than the share price of 693 pence which seems quite optimistic. d) Value per sharing using the price earnings (p/e) ratio The following are the price earnings ratio of Marks & Spencer for the years 2011 and 2012. Price Earnings Ratio    31-Mar-12 11-Jan-13 P/E Ratio = 376 = 11.56923 = 363 = 11.2       32.5             32.5       It can be observed that the Price Earnings ratio of M&S was at 11.56 in the year 2011. However, it reduced to 11.2 in the last year because the share price of the company decreased. If the P/E ratio of retail industry is compared with that of M&S, it can be observed that the P/E ratio of M&S is significantly higher than that of the industry. The retail industry is following a P/E multiple of 8.5 times whereas M&S is having more than 11 times. This shows that the share price of M&S is over-valued as compare to other industry participants. Task 2 Introduction There are various views regarding a particular stock as different market participants look at the stocks with different objectives and views. However, the only thing which is followed by all the investors is the fundamentals (Babu, 2012). Fundamental is the concept in finance which deals with the performance of the company in the given

Tyre punctures Assignment Example | Topics and Well Written Essays - 3000 words

Tyre punctures - Assignment Example Also, the causes and prevention of tyre punctures is discussed. Introduction A tyre puncture or a flat tyre is when the tyre starts riding on the rim of the wheel or the ground. This situation may cause potential damage to the tyre or the loss of control on the vehicle. Though it is a very common situation as it happened because of the everyday extensive usage of vehicles, it has serious consequences. Tyre punctures are easily repairable. They may happen most commonly in vehicles because of some sharp object that lets the air of the tyre release leaving it punctured. The tyre may be collapsed according to the size of the puncture, as the air may be released rapidly or slowly. Driving with a flat tyre can be very dangerous and may cause accidents. When a driver realizes that he has a punctured tyre, he should slow down and stop his car to get it repaired. According to one of the reports, 10% of motor vehicles were damaged because of a tyre puncture. Thus, to be able to drive safely an d avoid tyre punctures, drivers should be aware and focus on the prevention of tyre punctures. One of the best ways to avoid the flat tyres is to drive on proper and safe roads. Drivers should avoid driving on rough roads, construction sites or over debris. These areas may contain objects that puncture the tyre. There may be other serious causes of tyre punctures. There is a valve stem in the tyre, and if there is a failure of or damage to the valve stem, the tyre can release the air and be punctured. Furthermore, there are also issues related to vandalism in which the air is intentionally released from the tyre. Excessive rubbing of the tyre with the road or a collision with any object can also cause the tyre to be punctured. Old tyres or over used tyres can be weak and can allow the rough roads to tear them up. Such tyres should be immediately changed for a better and safe driving (Freitag, 2002, p.8) Global Issues The tyres and their use is a global phenomenon. Not only are there common reasons and consequences related to the tyre punctures, in fact there are also many global issues that are associated with the use of tyres and tyre punctures. Healthy tyres are very important as they tend to allow the motor vehicles to be safe and lower the risk of tyre punctures. In Saudi Arabia we can see many of these global issues that can be related to the tyre punctures. Statistics show that Saudi Arabia was one of those countries where most road accidents and tyre damages have been seen. These are because of many reasons and causes. To start with, global weather is one of the main issues because of which tyres are damaged and punctured. Since tyres are filled with air, it is very important to manage the air in the tyre and the air pressure. If any part of this is affected, it will damage the tyre and more generally cause a tyre puncture. The global weather, specifically the changes in global weathers will deeply affect the tyres. There are summer impacts and winter i mpacts both. Tyres need to be safe and healthy so that there are less chances of risking motor vehicles on the roads. Good tyres will also prevent road accidents. Both the types of weathers can have different effects on the tyre. Thus, drivers should take every measure to prevent the tyres from damaging during the extreme weather. As the summer season starts, there are many warnings given to the drivers to prevent their