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LESTER ELECTRONICS FINANCING ALTERNATIVE BENCHMARKING Lester Electronics Financing Alternative Benchmarking Annette Andreoli, Ryan Dierson, Roz Holland, Rick Weaver, billy Wygle University of Phoenix Introduction Key Course Concepts/ Overall Analysis Lester Electronics aim out use numerous financial applications moving forward with the Shang-Wa merger. One important tantrum the company will face is the weighted-average-cost-of-capital (WACC). The WACC approach begins with the insight that projects of levered firms atomic number 18 simultaneously financed with both debt and equity, (Ross, Westerfield, & Jaffe, 2005). With a new financial digest created by the acquisition, it seems vital to analyze a new WACC fetching both companys debt and equity into consideration. Even though both companies would seem to have to a greater extent leverage with their debts combined, substantiating results do not always occur. However, since debt is tax-advantaged relative to equity, it can be shown that the weighted-average-cost-of-capital declines with leverage in a world with corporate taxes, (Ross, Westerfield, & Jaffe, 2005). Therefore, taxes will need to be looked at in depth during this merger.

At this crucial time the importance is that Lester Electronics tries to make changes to affect the general WACC for the future success of the company. Lester Electronics should find ways to lower the WACC to retract more investors, especially after a merger when plus results atomic number 18 most necessary. This result is intuitively pleasing because it suggests that, when a firm lowers its WACC, the firms value will increment, (Ross, Westerfield, & Jaffe, 2005). With an increase in value, the company can not only more efficiently operate but also retain, accrue, investors. Numerous methods are used when figuring out the debt and equity ratio for a company, but the WACC will be the best for Lester Electronics to use. In addition, everyday discussions with business executives have convinced us that the WACC is...

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