Order custom papers, masters thesis and dissertation in 3 guided steps; human written!
Posted: March 24th, 2024
Lex Service PLC--- Cost of Capital In 1928 Lex Garages Limited, at the time of public incorporation, had single garage in London. After 60 years, Lex Service PLC became a leading company in automotive distribution and leasing in the United Kingdom. In late 1950, Lex obtained from Volvo Car Corporation the exclusive franchise to import and distribute Volvo cars in the United Kingdom that ended in1992 four years before the scheduled termination date. This news dropped the share price of Lexto 30%.
In 1970s, Lex started to expand its business into other services like transportation andleasing and for temporarily in hotel management business. By the end of 1983, Lex was structured around two principal groups¶ i-e Lex Automotive and Lex Electronics Worldwide. From 1991 to 1993, Lex sold its major electronic business to Arrow Electronics, Inc. With theseries of acquisitions by Lex, finally it entered in the profitable business by acquiring acontrolling interest in the U.
K importership, Hyundai Car (U. K) in September 1993. Thisacquisition gave Lex management control of a three year rolling contract that Hyundai Car heldwith Hyundai Motor Company of Korea. In this case study, board meeting was scheduled in 1993 to review its cost of capital proceduresand to determine whether Lex Service PLC should use different hurdle rates for differentdivisions or should use cost of capital for the whole company.
Lex Service PLC was concerned about its cost of capital in 1993 because from 1991 to 1993 Lexhad gone through many acquisitions and sales of assets that changed its capital structure in ahuge way. That change of capital structure included the sale of whole electronic division toArrow Electronice, Inc and acquisition of Hyundai Car (U. K). Moreover, they had cash toreinvest so Lex wanted to properly estimate its Cost of equity. Once new cost of capital is computed that will enable the firm to estimate its required rate of return on its investments.
Ingeneral companies make use of CoC through discounted cash flow or share pricing method. To calculate cost of capital (equity), risk free rate and value of risk premium, calculations are asfollows:If Lex had no debt in its capital structure then the relationship between its levered equity betaand asset beta can be like: ? (asset) = E/V * ? (equity) And it also implies that interest and principal payments on the debt are fairly safe that makes the beta of debt to zero. If there is no debt then cost of capital will become the cost of equity.
Moreover if Lex adds moderate amount of debt in its capital structure that means equity will become more risky and cost of equity will increase and so will the cost of capital. In order to fully evaluate future investment opportunities, Lex should single discount rate if the project is enough to represent the whole firm e-g in acquiring the very similar company. But Lexshould use multiple discount rates in evaluating the projects that replicates one of its divisions e-g investment in the automotive division should use the cost of capital of automotive division andsame goes for other divisions
You Want Quality and That’s What We Deliver
We’ve put together our writing team with care, choosing talented writers who shine in their fields. Each one goes through a tough selection process, where we look for folks with deep expertise in specific subjects and a solid history of academic writing. They bring their own mix of know-how and flair to the table, making sure our content hits the mark—packed with info, easy to read, and perfect for college students like you.
We don’t do AI-written essays or copycat work—everything’s original. Competitive pricing is a big deal for us; we keep costs fair while delivering top-notch quality. Our writers are some of the best out there, and we charge rates that stack up well against other services. This means you get stellar content without draining your wallet. Our pricing is straightforward and honest, built to give you real value for your money. That’s why students turn to us for high-quality writing services that won’t break the bank.
Academic integrity is at the heart of what we do. Every paper starts from scratch, with original research and writing tailored just for you. We write 100% authentic—no plagiarism research essays. Our strict quality control process includes scanning every draft with top tools like SafeAssign and Turnitin, so you get a similarity score and proof of originality. We’re obsessive about proper citation and referencing too, crediting every source to keep things legit. It’s all about giving you peace of mind with content that meets the highest standards.
When you decide to place an order with Dissertation Writer, here is what happens: