3. Core
business
is
in
air
transport
2009-‐2010
Revenue
2005-‐2006
Revenue
2%
1%
Airline
opera0ons
2%
7%
16%
Airport
terminal
and
food
opera0ons
7%
Engineering
service
4%
Cargo
opera0ons
89%
72%
Others
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
4. Core
business
is
in
air
transport
2009-‐2010
Revenue
2005-‐2006
Revenue
2%
1%
Airline
opera0ons
2%
7%
Airline
opera0ons
accounts
for
bulk
of
revenue
and
16%
Airport
terminal
food
opera0ons
Cargo
opera0ons
grew
7%
significantly
over
Engineering
service
5
years
4%
Cargo
opera0ons
89%
72%
Others
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
5. Compe00ve
advantage
lies
in
a
duo
strategy
of
differen0a0on
and
cost
Strong
focus
on
innova0on
Emphasis
on
core
business
DIfferentiation
Cost effectiveness
Service
excellence
Cost
management
Product
quality
Flexibility
in
downturn
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
6. Compe00ve
advantage
lies
in
a
duo
strategy
of
differen0a0on
and
cost
Strong
focus
on
innova0on
Emphasis
on
core
business
Con0nuously
reinvent
and
maintain
focus
on
core
business
DIfferentiation
Cost effectiveness
Service
excellence
Cost
management
Product
quality
Flexibility
in
downturn
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
7. Industry
trends
drive
need
for
innova0on
and
new
areas
for
growth
Stronger
compe((on
Full
airline
service
Leisure
travel
is
cyclical
and
vola0le
Expansion
Quality
service
and
Industry
facing
overcapacity
product
Low
cost
carrier
Long
haul
flights
Vulnerable
to
external
shocks
Full
service
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
8. Industry
trends
and
nature
drive
need
for
innova0on
and
flexibility
Stronger
compe((on
Full
airline
service
Cyclical
and
vola0le
Expansion
Innovate
and
differen0ate
to
keep
compe00ve
edge
Remain
flexible
to
respond
to
external
condi0ons
Quality
service
and
Overcapacity
product
Low
cost
carrier
Long
haul
flights
Vulnerability
to
external
shocks
Full
service
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
9. Need
to
remain
compe00ve
and
profitable
Where
we
are
Where
we
want
to
be
• High
end,
premium
full
• Remain
compe00ve
and
service
carrier
profitability
in
the
next
10
• Known
for
service
and
years
quality
products
• Con0nue
to
be
the
brand
of
• Biggest
airline
by
market
choice
for
air
transport
capitalisa0on
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
10. Need
to
remain
compe00ve
and
profitable
Where
we
are
Where
we
want
to
be
• High
end,
premium
full
• Remain
compe00ve
and
service
carrier
profitability
in
the
next
10
• Known
for
service
and
Key
Issues:
years
quality
products
to
innovate
to
• emain
compe00ve?
brand
of
1. How
r Con0nue
to
be
the
2. How
much
focus
should
be
choice
fon
aore
business?
• Biggest
airline
by
market
placed
or
c ir
transport
capitalisa0on
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
11. Innova0on
and
focus
are
the
key
issues
Key
Issue
Concerns
•
Product:
Reduce
or
maintain
number
of
service
classes;
How
to
innovate
to
remain
scheduling
complexity
compe00ve?
•
Brand:
Relevance
of
Singapore
girl
•
Narrow
or
balanced
porolio:
How
much
focus
should
be
balance
flexibility
and
placed
on
core
business
?
diversifica0on
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
12. Our
ACE
strategy
E
C
A
Accentuate
Cul0vate
Enhance
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
13. Increased
Scheduling
compe00on
Complexity
Business-‐only
Flights
to
Financial
Hubs
in
Europe
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
14. Increased
Scheduling
compe00on
Complexity
ACCENTUATE
Premium
Quality
Business-‐only
Flights
to
Financial
Hubs
in
Europe
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
15. Why
Europe?
Middle
East
Europe
China
Exis(ng
25%
compe((on
Government
25%
regula(on
Poten(al
demand
25%
Suitability
25%
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
16. Why
Europe?
Brand
recogni0on
Business
between
in
Europe
Asia
and
Europe
Why
business-‐only?
Success
in
US
SIA
appeal
to
business-‐only
premium
travellers
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
17. Why
Europe?
Brand
recogni0on
Business
between
in
Europe
Asia
and
Europe
• Established
network
and
sustainable
demand
• 21.8%
of
SIA
revenue
• OAG
Airline
Industry
Awards
based
in
UK
(6-‐
0me
winner)
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
18. Why
Europe?
Brand
recogni0on
Business
between
in
Europe
Asia
and
Europe
250,000.00
200,000.00
Europe
150,000.00
100,000.00
USA
50,000.00
Asia
0.00
1998
2003
2004
2005
2006
2007
2008
Stock
of
FDI
in
Singapore
(S$millions)
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
19. Why
business-‐only?
Success
in
US
SIA
appeal
to
business-‐only
premium
travellers
A340-‐500
is
re-‐fieed
with
business
seats
“Our
perseverance
through
the
early
part
of
the
downturn
un6l
mid-‐2009
has
been
vindicated
by
the
fact
that
non-‐stop
to
New
York
has
been
running
near-‐full
capacity
these
last
few
months.”
-‐
CEO
Mr.
Chew
Choon
Seng
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
20. Why
business-‐only?
Success
in
US
SIA
appeal
to
premium
business-‐only
travellers
•
Business
travel
is
less
affected
by
business
cycles
•
Less
price
sensi(ve
•
40%
of
revenue
comes
from
premium
travellers
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
21. Why
business-‐only?
Success
in
US
SIA
appeal
to
premium
business-‐only
travellers
Reduce
Reduce
scheduling
vulnerability
to
•
Business
travel
is
less
affected
by
complexity
business
cycles
business
cycles
Increased
sensi(ve
•
Less
price
differen(a(on
•
40%
of
revenue
comes
from
premium
travellers
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
22. Where
in
Europe
70000
60000
50000
France
40000
Germany
Netherlands
30000
Switzerland
20000
United
Kingdom
10000
0
1998
2003
2004
2005
2006
2007
2008
1)
FRANCE,
Paris
2)
GERMANY,
Amsterdam
3)
SWITZERLAND,
Zurich
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
23. The
Singapore
Girl
• Consistent
brand
since
1972
• Icon
of
Singapore
Airlines
• Symbol
of
warmth
and
hospitality
A
Na0onal
Icon
that
is
Interna0onally
Recognised
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
24. The
Singapore
Girl
Increased
compe00on
“Sexist”
cri0cism:
-‐ Regional,
global
stereotype
of
Oriental
girl
-‐
Premium,
budget
Consistent
brand
icon
for
Modern,
out-‐spoken
girl
premium
service
image
publicised
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
25. The
Singapore
Girl
Increased
compe00on
“Sexist”
cri0cism:
-‐ Regional,
global
stereotype
of
Oriental
girl
-‐
Premium,
budget
Enhance
‘modernity’
and
‘professionalism’
of
the
Singapore
Girl
Consistent
brand
icon
for
Modern,
out-‐spoken
girl
premium
service
image
publicised
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
26. The
Singapore
Girl
Subservient
Well-‐informed
and
ar0culate
Hospitable
Warm
Friendly
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
27. The
Singapore
Girl
Subservient
Well-‐informed
and
ar0culate
Hospitable
Warm
Friendly
INTELLIGENT
ARTICULATE
WELL-‐INFORMED
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
28. The
Singapore
Girl
Subservient
Well-‐informed
and
ar0culate
Write
columns
Host
“Travel
and
Living”
shows
Increased
recogni0on
for
the
news
companies
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
29. The
Singapore
Girl
Subservient
Well-‐informed
and
ar0culate
First:
regional.
Publicize
this
on
an
interna(onal
scale.
Write
columns
Host
“Travel
and
Living”
shows
Move
global.
Increased
recogni0on
for
the
news
companies
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
30. Enhance-‐
Divest
Tradewinds
to
focus
on
core
business
1 2
Divest
Build
35%
Strategic
importance
25%
Ability
to
compete
25%
Required
resources
Revenue
contribu0on
20%
100%
Total
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
31. Divest
to
a
local
tour
agency
1 2
Divest
Build
•
9
strategic
branches
in
Singapore
•
Cover
corporate
and
free
and
easy
tours
• Progressively
growing
and
expanding
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
32. SIA
Cargo
1 2
Divest
Build
SIA
Cargo
contributes
17%
to
SIA
GROUP
top
line
of
SIA
Currently
flies
to
70
ci(es
in
36
Passenger
countries,
with
more
than
600
Cargo
flights
a
week
Engineering
3rd
largest
Cargo
carrier
in
the
Other
world
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
33. Why
Focus
on
Cargo?
1 2
ASIAN
EXPORT
ECONOMY
EXPECTED
Divest
Build
TO
BE
ROBUST
•
New
products
launched
with
rebound
in
economy
•
More
Just-‐In-‐Time
(JIT)
Inventory
management
•
Rising
trend
of
China’s
PMI
export
orders
CONSOLIDATION
OF
CARGO
SECTOR
IN
JAPAN
AND
CHINA
•
Pose
as
a
strong
poten0al
compe0tor
•
Greater
need
to
build
up
SIA
Cargo
to
maintain
compe00ve
edge
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
34. Why
Focus
On
Cargo?
1 2
Divest
Build
GLOBAL
INCREASE
IN
CARGO
FREIGHT
TONNES
•
40%
increase
in
Freight
tonnes
from
28.8
mil
to
40.3
mil
in
the
last
decade
•
Falling
trend
in
US
Inventory/Sales
Ra0o
over
past
decade
US
Inventory/
Sales
Ra(o
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
35. How
To
Enhance
SIA
Cargo?
1 2
Divest
Build
Improve
opera(onal
efficiency
and
exis(ng
technology
Seek
growth
opportuni(es
in
emerging
markets
Exercise
flexibility
in
deployment
of
resources
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
36. Seeking
Growth
Opportuni0es:
Mexico
City
1 2
Divest
Build
Second
largest
economy
in
La(n
America
Largely
Export-‐Oriented
country
SGD
24
229
mil
&
SGD
13
133
mil
of
imports
and
exports
to
Singapore
from
La(n
America
in
2009
SIA
Cargo
has
not
developed
its
routes
to
La(n
America
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
44. Our
ACE
strategy
will
yield
results
Remain
compe00ve
and
profitable
How
focused
should
we
be
on
core
How
to
innovate
to
remain
compe00ve
business
Cul0vate
our
brand
image
Accentuate
our
premium
Enhance
our
core
business
•
Maintain
the
image
of
service
• Divest
Tradewinds
Singapore
girl
but
focus
on
•
Increasing
business
only
•
Build
cargo
opera0ons
being
ar0culate
and
well-‐
flights
to
Europe
business
informed
NPV
=
SGD
1
Billion
46. Middle
East
Middle
East
Europe
China
Exis(ng
Emirates
and
Qatar
Airways
are
dominant
players.
Also
highly
25%
recognised
as
a
premium
airline
compe((on
Government
25%
Not
an
issue
but
trade
rela0ons
not
as
good
as
with
Europe.
regula(on
Poten(al
demand
25%
Insufficient
business
travel
demand
Suitability
25%
Medium
haul
(e.g.
8
hours
to
Qatar)
Total
100%
47. Europe
Middle
East
Europe
China
Exis(ng
25%
Compe00on
with
Bri0sh
Airways
and
Air
France
compe((on
Government
25%
Friendly
rela0ons,
free
economy,
open-‐skies
agreements
regula(on
Poten(al
demand
25%
Significant
FDI
in
Singapore
Suitability
25%
Long
haul
(e.g.
13
hours
to
London)
Total
100%
48. China
Middle
East
Europe
China
Exis(ng
Strong
player:
China
Eastern
not
a
premium
service
provider.
25%
(3-‐star
Skytrax
ra0ng
as
compared
to
SIA’s
5-‐star)
compe((on
Government
25%
Strong
government
control
regula(on
Poten(al
demand
25%
Poten0al
trade
growth
(especially
with
growing
affluence)
Suitability
25%
Short-‐medium
haul
(e.g.
5
hours
to
Shanghai)
Total
100%
49. Skytrax
ra0ngs
Speaking
about
the
exclusive
5-‐Star
Airline
ranking,
Skytrax
CEO,
Mr
Edward
Plaisted
....
"The
greatest
aeribute
behind
5-‐Star
status
is
an
airline's
ability
to
deliver
the
combina0on
of
Product
and
Service.
A
great
product
standard
is
not
by
itself
the
key
to
a
5-‐Star
ranking,
and
we
are
equally
concerned
by
the
Quality
of
front-‐line
service
that
an
airline
provides.
We
are
focussed
on
recognising
airlines
whose
staff
deliver
a
true
5-‐Star
standard
of
service
delivery.
The
Star
Ranking
covers
both
Airport
and
Onboard
services
....
and
an
airline
mee0ng
a
5-‐Star
level
onboard,
whilst
only
at
say
a
3-‐Star
standard
in
the
airport
environment,
will
not
be
eligible
for
the
5-‐Star
accolade.
In
a
similar
manner,
there
may
be
an
airline
that
delivers
5-‐Star
standards
across
70-‐80
per
cent
of
product
analysis,
whilst
achieving
5-‐Star
status
for
90
per
cent
of
the
service
delivery
items,
and
this
will
be
classed
as
eligible
for
the
global
5-‐Star
accolade."
50. Why
Europe?
Stock of FDI in singapore by region/country
Region 1998 2003 2004 2005 2006 2007 2008
Asia 43,759 57.755.3 62.252.9 78,253.90 82,485.00 104,591.60 107,906.70
USA 22,810.70 37,162.60 41,019.50 40,574.40 38,325.00 51,550.80 51,801.60
Europe 49,619.80 103,936.10 120,505.70 139,987.40 174,034.90 197,976.80 193.525.0
Note:
Middle-‐East
does
not
have
substan0al
FDI
in
Singapore;
classified
under
‘other
countries’
52. LLC:
can’t
do
long
haul
A
trend
from
the
mid-‐2000s
was
the
forma0on
of
new
low-‐cost
carriers
exclusively
targe0ng
the
long-‐haul
business
market,
with
aircraz
configured
for
a
single
class
of
service,
ini0ally
on
transatlan0c
rou0ngs.
Probably
best
described
as
"fewer
frills"
rather
than
"no
frills",
the
ini0al
entrants
in
this
market
u0lised
second-‐
hand,
mid-‐sized,
twin
jets
such
as
Boeing
757
and
Boeing
767
in
an
aeempt
to
service
the
lucra0ve
London-‐US
Eastern
Seaboard
market:Eos
Airlines,
which
ceased
opera0ng
on
27
April
2008[8]Maxjet,
which
has
ceased
its
scheduled
business
flights,
but
is
planning
to
restart
as
a
luxury
charter
carrier[9]Silverjet,
which
ceased[10]
opera0ons
on
30
May
2008
53. Business-‐Only
(LA,
NY)
Singapore
Airlines
redefines
long-‐haul
air
travel
with
daily
all
Business
Class
service
to
New
York
(Newark)
and
Los
Angeles.
The
A340-‐500
is
fieed
with
100
of
the
Airline's
new
award
winning
Business
Class
seats.
54. Dest. Fleet Core businesses Primary markets Special service Implication for
(countries) size factors SIA
Singapore 93 (38) Append SIA Engineering, SIA Cargo, SilkAir East Asia (28.9%) Europe
Airlines ix 3 (SIA's subsidiary airline focusing on (21.8%) Americas (18.7%)
regional locations). And Tradewinds South-West Pacific (18.3%)
Tours and Travels. West Asia and Africa (12.3%)
Air-France 245 (>100) 640 Passenger operations, cargo and Europe (42% of revenue) Asia Premium economy'
aircraft repair and maintenance (+ 8 (17%) seats for Incheon-
subsidiaries) Paris (April 2010) as
well as other
destinations in Asia,
Carribean and Indian
Ocean
British 150 (75) 240 International and domestic air Europe (72%) therefore Innovative business- migration from
Airways services for passengers, freight and compete in European + class seatbeds (2000) SIA customers
mail transatlantic flight market
Emirates 100 (60) 137 East Asia and Australasia A380 targeting India In-flight
(27.9%) Europe (27.3%) (??) with special entertainment
Shower Spas and system innovating
Onboard Lounge. and competing
with SIA
Qantas 250 First of 50 Boeing
787 Dreamliners in
mid-2012. Launch of
new in-flight
entertainment system
China Eastern 80 intl/ 200 Competes with SIA in Asian market China, Hong Kong and Japan
Airlines regional in areas of passenger services and (72%)
routes, 330 cargo.
domestic
routes (110
cities
Cathay 120 North Asia, especially Hong Kong
Pacific and Mainland China
Low-cost Budget carriers increased frequencies and added new destinations while SIA cut down on capacity and routes due to economic
carriers downturn.
55. Price
Premium
Short
Distance
Long
Haul
SHORT
DISTANCE
-‐
Insufficient
demand
for
premium
service
-‐
Intense
compe00on
L(eadership
airlines)
Cost
budget
-‐
SilkAir:
regional
routes
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
56. LONG
HAUL,
LOW
PRICE
Price
Premium
-‐
Mismatch
with
premium
brand
image
-‐
Proven
not
to
work
Short
Distance
Long
Haul
Cost
Leadership
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
57. Price
Premium
Short
Distance
Long
Haul
Cost
Leadership
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
58. • Budget
Airlines
moving
upmarket
Increased
AND
into
long
haul
flights
compe((on
• AirAsia
Premium
X:
London,
Tehran,
Beijing
Scheduling
• 4
Airbus
classes
complexity
• 3
Boeing
classes
Key
Issues
Accentuate
Cul0vate
Enhance
Implementa0on
59. Backup
Slide:
What
SIA
Cargo
is
doing
Intensified
service
audit
programme
to
strengthen
opera(onal
efficiency
•
Overall
percentage
of
freight
“Flown
as
Booked”
and
percentage
of
“On-‐0me
no0fica0on
for
Delivery”
of
shipments
have
exceeded
expecta0ons
and
surpassed
the
Cargo
2000
average
performance
index
In
the
process
of
replacing
its
legacy
reserva(ons
system
with
a
new
user-‐friendly
system
•
New
system
Reserva0ons
express
will
enable
the
company
to
adapt
func0onali0es
or
new
requirements
more
quickly
to
customer
needs
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
60. Backup
Slide:
Why
Cargo
even
though
loss
made
in
2009
and
2010?
Airfreight
industry
was
severely
impacted
by
economic
downturn
During
this
period,
SIA
Cargo
seized
opportuni0es
to
ra0onalise
freighter
network
to
align
capacity
more
closely
to
demand
in
response
to
global
economic
downturn
SIA
Cargo
has
improved
flexibility
in
the
deployment
of
its
resources,
while
maintaining
cost
discipline
à
will
be
able
to
beeer
deal
with
uncertain
business
environments
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
61. Backup
Slide:
Why
La0n
America
Trade
paeerns
are
moving
away
from
the
old
North
models
of
across
the
North
Atlan0c
and
around
North
Asia
to
incorporate
increasingly
important
South
American
des0na0ons.
The
route
SIA
set
up
is
Singapore-‐Dhaka-‐
Brussels-‐
Sao
Paolo-‐Quito-‐Bogota-‐Bridgetown-‐Brussels-‐
Sharjah
and
Singapore.
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
62. Backup
sliede:
Why
not
acquisi0on
-‐
While
ozen
seen
as
the
best
managed
airlines
in
the
region,
SIA’s
overseas
forays
have
not
been
very
successful
-‐ SIA’s
investement
in
Air
NZ
was
substan0atlly
diluted
to
just
4.5%
in
2001,
and
SIA
sold
out
its
remaining
stake
at
a
significant
loss
in
2004
-‐
Following
SIA’s
49%
acquisi0on
stake
in
March
2000,
Virgin
Atlan0c’s
earning
are
yet
to
reacha
level
of
profitability
seen
prior
to
the
acquisiton
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
63. Partner
selec0on
• Aligned
strategy
(in
terms
of
ambi0on
for
growth
and
profitability)
• Brand
strength
and
good
corporate
reputa0on
• Strong
distribu0on
and
customer
reach
• Financial
strength
(ability
to
contribute
capital)
• Management
control
• Power
of
vito
Key
Issues
Accentuate
Cul0vate
Enhance
Financials
64. WHY
NOT
SIA
Engineering
• Revenue
contribu0on
in
2009-‐2010
is
SGD
1
billion
• Singapore,
Australia,
USA
(all
80.5%
stake
),
Philippines
(52.5%)
• 24
joint
ventures
and
subsidiaries
across
nine
countrie
• Strategic
importance:
maintaining
integrity
of
our
airplanes
• Ability
to
compete:
HIGH-‐
Awards
such
as
Asia-‐Pacific
Airline
MRO
Opera0on
of
the
Year
by
Avia0on
Week
• Contributes
to
the
product
quality
that
we
are
known
for
• However,
requires
significant
resources-‐
deem
it
necessary
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
65. Alliance
or
equity
when
nego0a0ng
barriers
Alliance
• Cross-‐border
regula0ons
restrict
it
to
minority
stakes
when
purchasing
equity
• Unsuccessful
investments
in
Air
New
Zealand
and
Virgin
Atlan0c.
• Can
achieve
open
skies
agreement
with
alliance
economic
agreement
(eg:
India)
• No
role
to
play
in
the
strategy
forma0on
and
policy
decisions,
as
well
as
crea0ng
real
synergies
that
have
las0ng
value
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
66. Back
up
:
Passenger
load
factor
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
67. WACC
Weighted Average Cost of Capital
WACC = KD (1-T) (D/V)+ KP (P/V) + KE (E/V)
I. Cost of Debt (Kd):
Estimated All-In Cost for Company 8.00%
Effective Tax Rate (a) 20.00%
*ASSUME NO DEBT
Kd = 8.0% * (1- 20.0%) = 6.40%
II. Cost of Preferred (Kp):
Estimated All-In Cost for Company (b) 0.00%
III. Cost of Equity (Ke):
Risk Free Rate (10-year T-Bond Yield) 1.98% Source: http://www.tradingeconomics.com/Economics/Government-Bond-Yield.aspx?Symbol=SGY
Target Beta (c) 0.78 Source: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html
Market Return
Market Risk Premium (d) 4.50% Source: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html
Small Stock Premium (e) 0.00%
Country Risk Premium 0.00%
Ke 5.49%
IV. Weighted Average Cost of Capital (K):
D/V 5.95% Total Assets 22484.3
P/V Total Debt 1338.9
E/V 94.05% Total Equity 21145.4
WACC 5.54%
Key
issues
Accentuate
Cul0vate
Enhance
Implementa0on
