On January 2, 2018, the chief executive officer of a private company in Karachi, Pakistan, Imaam Spinning Mills (Imaam), was planning to expand the company’s product line and enter the weaving business by setting up a new weaving plant. He asked his chief financial officer to conduct a financial evaluation financial evaluation of the project. To do so, she needed to calculate the weighted average cost of capital, using the comparative method to calculate the cost of capital for the unlisted firm based on financial data from Imaam and comparable firms, and determine the feasibility of the project.
Imaam 纺纱厂：私营公司的资本成本 Imaam Spinning Mills: Cost of Capital of a Private Company (Simplified Chinese version)
Aaqib Nawaz, Imran Yousaf, Zhichuan (Frank) Li
Product #:W35481
Supplier:Ivey
Discipline:Accounting, Finance
Setting:Pakistan, 2023
Subjects:
Industries:
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Learning Objectives
- 解释如何选择可比公司以及如何在财务分析中使用可比公司的数据。
- 结合可比公司的相关信息，计算非上市公司的资本成本。
- 讨论财务分析中的困难和不确定性。
- 阐述资本成本的影响。
This case can be used in financial management, corporate finance, and project management/capital budgeting courses at the undergraduate and graduate levels. This case can be used for teaching the cost of capital, as it covers the basic concepts of levered beta and unlevered beta and how they are calculated. After working through the case and assignment questions, students will be able to do the following:
- Explain how to select comparable companies and how to use data from comparable companies in financial analysis.
- Combine relevant information from comparable companies to calculate the cost of capital for an unlisted company.
- Discuss the difficulties and uncertainties in financial analysis.
- Explain the implications of the cost of capital.