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The Cost of Capital
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</p> <p><b>Chart 1</b> </p> <p>Table X XXXXX the XXXXXX XXXXXXXX by the equity XXXXXXX (X.8%) XX substantially XXXXXX that the return required XX XXX XXXX holders (X.0%) XXXXX XXX XXXX for the equity holders XX higher as compare to the XXXX for the XXXX XXXXXXX. The assets of Sugarloaf XXXXXXXX are XXXXXXXX entirely through XXXXXX XXXXXX XXXXX it XXX no XXXX. XXXXXXXXXXXX, XXX cost of XXXXXX (8.X%) provides an XXXXXXXX of the XXXX XX XXXXXXX, XXXXX the XXXXXX XX the XXXX source of capital. By XXXXXXXXXXXXXX, the XXXXXXXX return or cost XX XXXXXXX for XXXXXXXXX Mountain investments is assessed XXXXX XXXXXXX’s estimate of Sugarloaf Mountain’s XXXX XX XXXXXX, X.X%. The risk of debt XXXXXXX is XXXXX as compare to equity holders because XXXX holders XXXXXXXXXX XXX first XXXXX on the XXXXXXX. XXX XXXXXXXX average XXXXXXXX return XX debt and XXXXXX XXXXXXX XXXXX XX the XXXXXXXX return on XXX XXXXXX return since XXXX XXXXXXX and XXXXXX XXXXXXX combine XX XXXXXX the XXXXXXX assets XXXXXXX. XX is XXXXXXXXXX XX XXX XXX optimal capital XXXXXXXXX XXXXXXX in estimating XXX cost of capital XXX it is XXXXXXXXXXXXX to XXXXXX the XXXXXXX XX it XXX an inappropriate capital XXXXXXXXX. XXX XXXXX Oak the XXXX can be XXXXXXXX just multiplying XXX XXXXXXX XX XXX required returns XXXXXXX White XXX is funded XXXX XX% XXXX XXX 70% XXXXXX. Because XXXX payments are tax XXXXXXXXXX therefore it cost White Oak XXXX X.3% to deliver XXXX returns XX X.0% with a XXXXXXXX XXX rate of 34% (XXXXXXX,2014). </p> <p><b>XXXXXXXX of XXXX of Capital at Tasty Bread </b> </p> <p>XX order to infer XXX XXXXXXXX return XXX the XXXXXX XX each firm the XXXXXXXX XXXXXXX XXXXXXXX return of equity XXX XXXX XXXXXXXXX. XXX standard XXXXXXXX for cost of capital XXXXXXXXXX is XXXXXXXXXX XXXXXXX the method of estimating a weighted average XXXX of XXXXXXX (WACC) XX XXXXX the XXXXXXXX average of XXX prevailing XXXXX of debt and XXXXXX. Since the XXXX profile linked XX XXXX XXX XXXXXXX business is XXXXX XXXXXXXXX XXXX XXX main bakery XXXXXXXX XX the Tasty XXXXX XXXXXXXXX, XXXXX Bread has been XXXXXXXX. WACC XX Tasty XXXXX XX deemed to suitable XXX risk XXXXXXXX benchmark XXXX XX 7.X%. XXXXX making the XXXXXXXXXX XXXXXXXX the selection XX XXXXXXXXXX XXXXX has some XXXXXXXXX, XXXXXXXXX in order XX XXXXXXX this XXXXXXXX XXXX of Tasty XXXXX XX XXX XXXXXXXX XX the basis XXX cost XX XXXXXXX isn't the cost XX funds. The XXXX and jellies investment required to be more XXXX the benchmark XX XXXX and jellies XXX XXX XXX bakery benchmark; XXXX all XXXXX XX XXXXXXXX where the XXXXX XX going XXX not where the XXXXX XX coming. XXXXX Bread's jam and XXXXXXX XXXXXXXXXX XX XXXXXXXXX by XXX weighted averages estimates XX Moose XXXXX 8.0%, White Oak 7.X% XXX XXXXXXXXX XXXXXXXX X.2%. XXX consistency of XXX XXXXXXXXX increased his XXXXXXXXXX XXXX the appropriate XXXXXX rate XXX the XXXXXXXXXX XXXXXXX was 8.X% XXXXX XXXX appeared XX XX the XXXXXXXXXX XXXX of XXXXXXX XXX investments of similar risk. Because the 8.0% XXXX XX capital XXXXXXXX the XXXXXXXX XXXXXX of 7.X%. </p> <p><b>Recommendations</b> </p> <p>XX is worth noting that 8.0% cost XX capital exceeds that XXX expected return of X.X% XXXXXXXXX it XXXXX XXX XXXXXX economic value XXX jam XXX jellies investment XXXXX XXX XXXXXXX XXXXXXXX. It XX XXXXXXXXXXX XXX Tasty Bread to XXX a XXXXXXXXXX of XXXXXXXXXX firms in order XX reduce XXX XXXXXXXXXX error XXXXXXXXXX XXXX individual XXXX estimates and X.0% XXXX XX capital XX XXXXXXXX XX XXX XXXXXXXXXXX estimate for Tasty Bread XXXXX XX the XXXX of XXXXXXX estimates of the XXXXXXXXXX XXXXX XXXXXX than its own XXXX of capital. XXXXXXXXXXX, The J.M Smucker Company XXX also XX recommended XX an XXXXXXXXXXX XXXXXXXXXX company XXX XXXXXXXXXX XXX cost XX capital XX Tasty XXXXX. The XXXXXXXX XXXXXXX XX weighted XXXXXXX cost of XXXXXXX XX XXXXX additional considerations XXX compare XXXX the XXXXX calculated XXXXXXXX XXXXXXX XXXX of capital of XXXXX XXXXXXXXXX XXXXX XXX in XXXX XX XXXXXXX signals a lower XXXX XXXXXXXXXX XXXX it will be a XXXX XXXXXXXXXXX otherwise XXX. XXXXX XX debt-XX-capital ratio of 15%, cost XX equity of X.X%, XXXX of XXXX XX X.X% XXX XXXX of XXXXXXX is XXXXXXXXXX as XXXXX: </p> <p><i>XXXX (Smucker) = X.15 × X.5% × (1 − 35%) + X.85 × X.7% = X.X>#/i### </i></p> <p><i>The calculated WACC XX XXXXXXX XX lower as compare XX XXX rates already XXXXXXXXX XXX XXXXX XXXXXXXXXX firms such as XXXXX XXXXX, XXXXX Oak XXX Sugarloaf Mountain. It shows XXX XXXXXX risk XXXXXXXXXX XXXX XXXX's operations. WACC XX 7.7% XX these alternative XXXXXXXXXXXXXX provides XXXXXXXXXX to lower XXX estimated project XXXX of capital that XX X.8% XX how comparable Pane believed XXXXXXX to be to the XXXX XX the proposed project. Based on this fact, it XX recommendable XX XXX XXX XXXX XX above calculated three XXXXXXXXXX firms so that there can be obtained minimum rate of XXXXXX XX %X.8 XX XXXXX XXXXX XXXXX produces XXXXX XXX its debt XXXXXXXXX as XXXX XX equity investors (Michael,XXXX) </i></p> <p><i><b>References</b> </i></p> <p><i>XXXXXXXXXX of Cost of Capital. (n.d.). <em>XXXXXXXXX XXXXXXX: Theory and XXXXXXXX</em>, XX-XXX. doi:10.XXXX/9788132101284.XX </i></p> <p><i>XXXXXXX,S. (XXXX). XXX XXXX XX XXXXXXX- XXXXXXXXXX and XXXXXXXX. Darden Publishing Business. </i></p> <p><i> </i></p> <p><i> </i></p> <p><i> </i></p> <p><i> </i></p> <p><i> </i></p> <p><i> </i></p> <p><i> </i></p> <p><i><br></i></p>">
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