Financial Management - Alcoa

Question: Describe about the Article for Financial Management - Alcoa. Answer: Financial Management - Alcoa The essay contains an analysis of the Alcoa Stock. The essay will have a calculation of a rate of return of the stock of Alcoa Stock from July 1, 2006, to July 1, 2016. The calculation will be done on the consideration of historical price form the Yahoo! Finance with the implication of dividend as well. Further, there is an estimation of a weighted average cost of capital from the data extracted from the company website. Finally, there will be an explanation on the decision of Alcoa acquisition on two separate companies. The data for which will be extracted from the annual report as well as through some public source of information. By taking into consideration, the extracted data from Yahoo! Finance there calculation of a rate of return has been done which has come to in negative figure with 0.11% whereas after considering the holding period return approach which includes dividend in the calculation the figure comes to 3% which is positive one. So from the calculation, it can be said that approach of the holding period return serves to be a beneficial strategy for getting a high return (Brigham and Ehrhardt 2013). Next is the calculation of the weighted average cost of capital, which is calculated by extracting the recent data of the company and corporate tax rate taken into consideration will be 35% which is as per the US Federal rate. WACC stand to be 2% which is quite reasonable (Titman et al., 2015). As per the public source, the news of Alcoa split has become fire in the forest (Alcoa.com.2016). The company will be splitting into a publicly trading company, has been acknowledged as a legacy in the aluminum operation as well as diversification in the automotive industry. The company has achieved high growth from its titanium and aluminum production as well as from the aerospace sector. According to the CEO of Alcoa, this is the right time for getting split. Division of a company has served to be good position and strategy for a company getting high revenue as well as profit. After the company getting split up, it will be adding 40% of the revenue to the sector of Alcoa's Aerospace, automotive and transportation as well as in the construction of the building (Alcoa.com.2016). After the company getting split, Arconics shareholders will receive 80.1% of the shares in new shareholding. Arconic will be acquiring 85% of the companys shareholding $9 billion in the form of debt, by givin g a boost to Alcoas survival in the aluminum market. The split will help the company in increasing the expected trading price of the common stock, which in turn will help in improving the liquidity of the company (Alcoa.com.2016). On the overall analyzing the financial position of the Alcoa's stock, it has been observed that company will be earning a huge profit after getting a split of in two separate entities. Further, it has been observed that at present, the company has 1.8 billion of authorized shares. On this division, Arconic will be focusing on the specialty of the value adding products of aluminum. Whereas, another division of the company will be focusing on the aerospace and automotive as well as transportation sector, for the objective of achieving high return as well as profit. Reference and Bibliography Alcoa.com. (2016).Alcoa in the USA. [online] Available at: https://www.alcoa.com/usa/en/home.asp [Accessed 27 Sep. 2016]. Arnold, G., 2014.Corporate financial management. Pearson Higher Ed. Brigham, E.F. and Ehrhardt, M.C., 2013.Financial management: Theory practice. Cengage Learning. Brigham, E.F. and Houston, J.F., 2012.Fundamentals of financial management. Cengage Learning. Brown, M.T., Rascher, D.A., Nagel, M.S. and McEvoy, C.D., 2016.Financial management in the sport industry. Holocomb Hathaway, Publishers. Finkler, S.A., Smith, D.L., Calabrese, T.D. and Purtell, R.M., 2016.Financial management for public, health, and not-for-profit organizations. CQ Press. Jones, C.S. and Tuzel, S., 2013. Inventory investment and the cost of capital.Journal of Financial Economics,107(3), pp.557-579. Kaplan, R.S. and Atkinson, A.A., 2015.Advanced management accounting. PHI Learning. Lasher, W.R., 2013.Practical financial management. Nelson Education. Li, X., 2015. Accounting conservatism and the cost of capital: An international analysis.Journal of Business Finance Accounting,42(5-6), pp.555-582. Thompson, B.K., 2015. Cost of Capital and Economic Development: The Case of Ghana's Liberalized Capital Market.Journal of Finance,3(1), pp.01-10. Titman, S., Keown, A.J. and Martin, J.D., 2015.Financial management: Principles and applications. Pearson.