Capital structure of CVS Essay Example | Topics and Well Written Essays - 750 words

smashing structure of CVS - Essay ExampleTherefore, candour financing usefully increases the weighted number terms of capital.3. Schedule out & calculate EVA. Is it good or bad and what brings EVA up & trim for CVSThere are discordant ways of measuring a firms action. One way is to habit accountancy measures such as return on equity, return on assets, etc. An opposite way is to use market place measures and determine the firms performance by looking at the var.s value. These measures, however, do not provide an effective evaluation of firm performance. One such measure that determines the true value-creating performance of a firm is stinting Vale Added (EVA) analysis. This analysis attempts to determine the net share to value by a companys investment decisions which other measures fail to provide. This means the after-tax returns of the company should exceed the personify of capital invested. EVA is calculated as followsEVA = (ROIC - WACC) x Invested CapitalFormula f or Return on Invested Capital (ROIC)ROIC = Net Income / Liabilities + Shareholders EquityROIC for CVS = 11.4%Invested Capital = market capitalization = 262,500,000 (common stock * share price)EVA for CVS is 7,875,000EVA is dependent on return on invested capital as well as the follow of capital. Higher ROIC and a lower cost of capital can increase EVA significantly.4. Look at EVA & how do you need to change bank statements to earn the best capital structureAn EVA of 7,875,000 means this is the net contribution to value added by the companys investment decisions. Higher EVA can alter the capital structure by increase the proportion of equity to debt. However, every company has a target in terms of maintaining... Weighted average cost of capital is the discount rate used to convert expected future cash work into present value for all investors. Using the book value of debt and equity, CVS is 26.2% financed by debt and 73.8% financed by equity1. Cost of equity can be calculated using the capital asset pricing model.There are various ways of measuring a firms performance. One way is to use accounting measures such as return on equity, return on assets, etc. Another way is to use market measures and determine the firms performance by looking at the stocks value. These measures, however, do not provide an effective evaluation of firm performance. One such measure that determines the true value-creating performance of a firm is Economic Vale Added (EVA) analysis. This analysis attempts to determine the net contribution to value by a companys investment decisions which other measures fail to provide. This means the after-tax returns of the company should exceed the cost of capital invested. EVA is calculated as followsLook at EVA & how do you need to change bank statements to create the best capital structure?An EVA of 7,875,000 means this is the net contribution to value added by the companys investment decisions. Higher EVA can alter the capital structure by incre asing the proportion of equity to debt. However, every company has a target in terms of maintaining an optimal capital structure that minimizes cost of capital and maximizes shareholder wealth. A higher equity and lower debt in the capital structure substantiates.