nnのCPA試験の旅 in Hawaii CPA試験の旅 in Hawaii

Hello again!

by nn_77
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WACC story on Nikkei News Paper

A serial article titled 「企業価値を探る」is now being carried on 日経新聞, or Nikkei News Paper. The one on Oct. 13, Fri. 2006 features the notion of WACC, referring to an actual case study of 花王, or Kao Corporation.

As is widely known, Kao Corp. has acquired カネボウ化粧品, or Kanebo Cosmetics Inc. They raised funds necessary for the acquisition not by equity finance, but by such debt finance as syndicated loan and new issuance of bond.

But why? Issuance of bond ends up with the obligation to pay interest periodically, and the debt ratio increases as the equity capital ratio decreases. Thus, equity finance, like issuing new CS seems to appear more attractive. Yet, in this M&A project of Kao Corp., debt finance does make a sense once we simulate the effects by calculating WACC, which is demonstrated in the article of 日経新聞 which I introduced above.

I think WACC is important notion, although we don’t see them so often even on Nikkei News Paper.

I suppose you’d find the article even more interesting if you are now preparing for BEC, Why not check it out?

I once made a summary note on WACC.
by nn_77 | 2006-10-15 16:55 | >BEC | Comments(6)