Business Analysis Valuation: Using Financial Statements, Chapters 6 and 7

Instruction: (Please, In this paper I have collected more than one solution ( answered) for each question, but I am not that experienced with Analyzing financial Accounting, so I will need a tutor experience to sum up the best answer or re evaluate my answer and connected together re sum it all together and make it concrete analyzed answer for each question). MBA 520 Module Six Forecasting Model Questions The questions that follow and the article Comparing the Accuracy and Explainability of Dividend, Free Cash Flow, and Abnormal Earnings Equity Value Estimates will inform your completion of milestone III. An understanding of the models in this assignment will assist you in hypothesizing the incremental impact of a new investment project for the company. The understanding of these models will contribute to your ability to look toward the future when considering the direction of an organization. Prompt Once you have read the article “Comparing the Accuracy and Explain ability of Dividend, Free Cash Flow, and Abnormal Earnings Equity Value Estimates” and Chapters 6 and 7 of your text, review and complete the questions below. Use the article and your text to inform your responses to the questions below. Assignment Questions: 1. For models 2, 2a, and 2b: • What is the best way to minimize the weighted average cost of capital? My first Answer: Weighted Average Cost of Capital (WACC) is the combined rate at which a company repays borrowed capital. It comes from debit financing and equity capital. A company can reduce its WACC by cutting debt financing costs, lowering equity costs and capital restructuring. Some of the steps a company can take to lower WACC companies can lower their costs by issuing bonds by lowering the interested rate they offer to investors. The company can also move to a higher tax rate, or they can offer stocks with low beta to be less risky to investors and offer less of a risk premium. Another answer: A best way to minimize the WACC (weighted average cost of capital) WACC is the combined rate at which a company repays borrowed capital. A business mainly raises capital from debt financing and equity capital , and computing WACC involves adding the average cost of debt to the average cost of equity . Reduction of WACC stretches the spread that lies between it and the return on invested capital to maximize shareholders value. A company can reduce its WACC by cutting debt financing cost and lowering equity cost and capital restructuring. Caution must always prevails regardless of method your company employs to reduce WACC. This is because suitability of each of these methods depends entirely on the existing capital structure of the company. For example if your company already has lot of debt it would not wise to take on more debt when seeking to reduce equity cost. Huge amount of long term debts could extremely burdensome to the company. Another Answer: To minimize the weighted average of the cost capital...

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