Finance and Accounting Research Paper Example | Topics and Well Written Essays - 1250 words

Finance and news report - Research Paper ExampleIt is without doubt that table salt had developed into a well-rounded and jump on enterprise but Sea Shore Salt had grown gradually over the years however, on the peril of its competitors that were not well known in the business. The company had developed a legacy with its differentiate name that was ideally known and recognized in the ara giving the company a warlike advantage despite it being very difficult to pronounce the name quickly (Sages & Grable 57). Bernice reported to twist on January 2, 2006 and everything was seen to be going smoothly until Mr. Brinepool sent her a memo on the companys cost of capital, giving her the task of explain to all the other managers the companys weighted come cost of capital. Bernice had not expected such a task so soon and hence, she stayed at the bit late that night to prepare for any questions that may be shot at her during the meeting that was plan to be held the following day. Bernice at first analyzed and summarized the companys recent balance sheet of paper to and later on wrote down some points she had discovered (Sages & Grable 58). The bank where the company had taken a contribute charged an interest that was similar to the existing market rate bearing in mind that the long- bourne debt had previously been issued not so long ago. This meant that the book as well as the market determine of the debt could not have a great difference in margin. The company had issued persuade about 35 years ago at the time when the interest rates were significantly lower than they are now. The stock were expected to rise by a large margin over the years and eventually drop dead very lucrative in future though this did not happen. The current stock which was initially prefer was now trading at only $70 per take contrary to what the management expected the share price to stand at by this time. Common stock was expected to trade at $40 per share by this time. Earnings for the subsequent year were projected to be at about $4 and the dividends shareholders were going to receive at the end of the fiscal year was probably expected to be more or less $2 per share. Sea Shore Salt had a tradition of using 50% of her earnings to gift dividends to its shareholders and the rest would be retained by the company for future expansion and growth. Fig 12. 2 Mr. Brinepools cost of capital memo Sea Shore Salt Company Spring Vacation Beach, Florida unavowed MEMORANDUM DATE January 15, 2006 TO S.S.S. Management FROM Joe- Bob Brinepool, president SUBJECT Cost of capital This memo gives and penetration and understanding about the companys long- term policy concerning rates to be considered in term of making decisions involving capital investment. Recently, many people have started to raise questions and there has been an air of confusion with regards to this distressing matter. Sea Shore Salt analyses investment by discounted a cash flow that is discounted. The pr oblem in discount rate is the weighted average cost of capital experienced by the company later tax. The weighted average cost of capital is the combination of the amount of returns that investor expect a company to submit at the end of each fiscal year. These investors include persons or institutions such as banks, bond holders or even stock investors this is on top of the already present stock owners. Sea Salt financings are summarized in the following table Amount (in millions) percent of total rate of return Bank give 120 20% 8% Bond issue 80 13.3