¶ … working average cost of capital (WACC) is an important component of determining what operations to finance and comparing different alternatives. This calculation takes into account the costs that go into providing the capital that a firm can use for different ends. It is sometimes referred to as the "hurdle" rate because projects must always return a require amount to make the investment viable; with a few exceptions. The cost of capital is determined by first considering the firms equity and debt structure. Each time of investment in the business will have a different rate of return that it offers investors. For example, assets that were financed through a bank will have a different repayment structure and rate than assets that were financed through the sale of stock. The company must first average the cost of all the different financing activities that it has engaged in before it can calculate a baseline for the WACC. Other factors are also important and play a role in the WACC calculations such as the "risk-free rate." This is the rate that is considered to be virtually risk free and government bonds are typically used. If the company can invest in a risk-free investment, then there is an opportunity cost in investing in alternative investments and this must be considered. There is also an inflation...
Cash flows that come in the future are not worth quite as much as cash that comes today because future cash flows must be discounted to reflect the effects of inflation. Furthermore, the company must also include risk in the calculation. There is always a risk that the investment will not provide the returns expected and the company must also include risk when calculating WACC.
International Trade Because of the increasingly globalized nature of the economy, manufacturers, retailers and service providers have more options to locate sources of supply and labor where overall costs are lower than in their home markets. In industry today, parts and supplies frequently come from many different countries, such as the Boeing 787, with 65% of its components outsources to foreign companies (Hill 2011). Another example is flat-screen TVs, which have
International Trade and Comparative Advantage Because trade between nations is as ancient as mankind itself, there have been a number of theories advanced over the years to help account for why some countries seem to benefit more than others in the process. To this end, this paper provides an overview of trade theories according to Adam Smith and Ricardo to determine how free trade has adversely affected developing countries in general
Given the high degree to which AIDS impedes global economic integration, in particular of sub-Saharan Africa, it would be reasonable to think that such a transnational issue would bring nations and institutions together to a much higher degree than we see. Overall, the various aspects of the international system have enabled the expansion of global economic integration. Regimes, institutions, and regional interests bring nations together to meet common objectives. As
185). Components for these products may be manufactured and put together in branches in various countries throughout the world. Thailand, Malaysia, Singapore, and Hong Kong were involved in the earliest types of production sharing, which included assembling electronic components manufactured in other countries. Production sharing, one World Bank study determined, currently contributes to approximately 30% of manufacturers' total global trade. Foreign affiliates' international exports approach over 7% of global
" (U.S. Securities and Exchange Commission Annual Report No. 1-2217) Economical and Political Influences: Economical and political conditions in the international market place include: "civil unrest, product boycotts, governmental changes and restriction on the ability to transfer capital across borders." It is very possible that the current instability in economic and political conditions in the Middle East, North Korea, Iraq or elsewhere as well as continued terrorism could adversely impact the Company's
S. markets are listed as being: Import Licensing Services Barriers Also is concern in the presence of the government in the telecommunications market sector. U.S. exporters need to know that shipping of foods and agricultural products must be done to meet Italian requirements whether sealed and bonded or not. Italy has also banned the commercialization of four corn varieties approved by the EU. The biotech corn ban may be in violation of EU
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