Please answer the following questions:
We care more about the concept, methodology and the procedures of solving these questions.
Q1. How the calculation of the weighted average cost of capital (WACC) of SABIC (Saudi Petrochemical listed company) is similar or different from calculation of the WACC of Arab National Bank (Saudi listed Bank)? Why? If any differences, Show the steps in the calculation of WACC for each firm.
Q2. As ARAMCO (largest oil company) is preparing to go public proper valuation is very important.
1- Is the DCF model sufficient for this valuation? Why?
2- Is there an imbedded real option in valuation?
3- If we are assume to use the black shcoles model what would be the five variables?
1- Can Beta be negative? If yes, why and how will it affect WACC?
2- Can cost of equity be less than cost of deb if beta is negative?
1- If a firm is considering changing its production from seasonal to level production, what risks will it face and how will quantify and minimize this risk?
2- Which and in which direction would elements in the financial statement changes?