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Royal Mail plc: Cost of Capital
Schill, Michael J. Case F-1774 / Published January 27, 2017 / 12 pages.
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Product Overview

This case examines the cost of capital estimation for British postal service company Royal Mail plc in 2015?a time when company managers and government regulators were adjusting to private ownership after 500 years of government ownership. The case features a flawed cost of capital estimation analysis that includes common blunders. Students are invited to evaluate this analysis and provide their own alternative estimate for the cost of capital for Royal Mail.

Learning Objectives

Emphasize that the cost of capital serves as a market-based benchmark of performance; contrast benchmarking based on a cost of funds approach versus an opportunity cost of capital approach; and introduce the mechanics of estimating a firm's weighted average cost of capital

  • Overview

    This case examines the cost of capital estimation for British postal service company Royal Mail plc in 2015?a time when company managers and government regulators were adjusting to private ownership after 500 years of government ownership. The case features a flawed cost of capital estimation analysis that includes common blunders. Students are invited to evaluate this analysis and provide their own alternative estimate for the cost of capital for Royal Mail.

  • Learning Objectives

    Learning Objectives

    Emphasize that the cost of capital serves as a market-based benchmark of performance; contrast benchmarking based on a cost of funds approach versus an opportunity cost of capital approach; and introduce the mechanics of estimating a firm's weighted average cost of capital