Send the link below via email or IMCopy
Present to your audienceStart remote presentation
- Invited audience members will follow you as you navigate and present
- People invited to a presentation do not need a Prezi account
- This link expires 10 minutes after you close the presentation
- A maximum of 30 users can follow your presentation
- Learn more about this feature in our knowledge base article
Do you really want to delete this prezi?
Neither you, nor the coeditors you shared it with will be able to recover it again.
Make your likes visible on Facebook?
You can change this under Settings & Account at any time.
Copy of American Chemical Corporation Case Study
Transcript of Copy of American Chemical Corporation Case Study
American Chemical Corporation Case Prensentation
Stanley Chen Paul Williams Reutemann
Christie Rainaldi Zhiemei Deng
Finding the equity B for Dixon
Average the Asset B of comparable frims=1.09
International Minerals and Chemicals
Bequity for Dixon=Basset*[1+ (1-T)*D/E]=1.4
Cost of Equity
(cc) image by nuonsolarteam on Flickr
Finding the Risk Premium
Finding the risk-free rate
Re=Risk Free Rate + Risk Premium (Beta)
= 9.5% + (7.9%)(1.4) =21%
take the Long term Treasury Bonds interest rate of 9.5% as our Risk Free rate
Market risk premium = expected market return - risk-free rate
We will use the average s&p 500 index from 1975-1989 which equals to 17.4% as a proxy for expected return of the market.
Thus, Risk Premium=17.4%-9.5%=7.9%
the after tax cost of debt is (1-0.48)*11.25%= 5.85%
WACC=0.35*5.85%+0.65*21% = 15.6975%=16%
Without Laminated Technology: NPV = ($2346.01)
Laminated Technology: NPV = $8731.99
The mixed result of both scenarios is $8731.99 + ($2346.01) = $6385.98
not approve the acquisition of the Collinsville plant
hold off on the acquisition and instead raise capital over the upcoming years in order to invest in a project with updated technology