Strategic Corporate Fiance Essay Example | Topics and Well Written Essays - 2500 words

Strategic Corporate Fiance - Essay drillFrom the above-mentioned table, it is quite evident that Net plus Value of tag and Spencer have increased for 0.03 bases breaker point and is higher in 2011 than 2010. The companion has net assets worth of ?1.72 in 2011 and ?1.69 in 2010, which clearly explains that the Net Asset Value is improving. 2) exist of Capital (CAPM) In the table mentioned below, the computations have been shown for the weighted average cost of expectant of the company, Marks and Spencer. The cost of debt of the company is 4% whereas the cost of capital of the company was found as 4.5%. The weighted average cost of capital of the company, which incorporated the value of debt and value of equity was found to be 4.33%. Cost of Debt Rd = Annual Coupon reliable Bond harm = 5 125 Rd = 4.00% Value of Equity Ve = Current Price of Share x Number of Shares outstanding = 3.76 x 1,600 = 6,016 Value of Debt Vd = Current Price of Bond x Number of Bonds Issued = 1 25 x 2,489 = 3,111 100 Weights Wd = Debt = 3,111 = 34.09% Debt + Equity 3,111 + 6,016 We = Equity = 6,016 = 65.91% Debt + Equity 3,111 + 6,016 3) Dividend egression Model (DGM) In this section of the paper, computations for Gordons dividend growth models have been shown. ... K g 0.045 - 0.02 From the above-mentioned table, this information can be extracted that if the growth rate is zero, then the hypothetical ex-right cost of share price of Marks and Spencer is approximately 377 pence. In contrast to that, if it is assumed that dividend grow at the rate of 2%, then on that point is an enormous increment in the share price of the company, which is around 693 pence. It can be express that at the growth rate 0, the share price of the company of 363 pence is more appropriate than the share price at growth rate 2%, which is 693. The share price of 693 pence is highly optimistic. 4) Price Earnings Ratio (P/E Ratio) The following table demonstrates the Price Earnings Ratio of Marks and Spencer. Price Earnings Ratio 31-Mar-12 11-Jan-13 P/E Ratio = 376 = 11.56 times = 363 = 11.2 times 32.5 32.5 In the year 2011, the Price Earnings Ratio of the company is 11.56. Nevertheless, it reduced in the last year to 11.2 because there was a reduction in the share price of the company. The average price earnings ratio of the respective industry of Marks and Spencer is 8.5 times, on the other hand, the P/E of Marks and Spencer is 11.2 times. If the P/E of Marks and Spencer is compared with the industry average, then it can be stated the Price Earnings ratio of Marks and Spencer is substantially higher than the industry average. It reveals that the share price of the company is over-values as compared to its industry competitors. Task 2 Investment in stocks is something which can be extremely tricksy for ordinary investors. This is because the investors lack in having capabilities regarding the pricing of the stocks. The pricing of stocks ha ve turned out to be a key factor as a minor mistake in