Capital Valuation Paper

Capital Valuation Paper

FIN/419

November 24, 2014

Capital Valuation Paper

Starbucks is one of the most well-known coffee shops in the world. Continuing to grow worldwide branching into e-commerce and adding to their food supply. Starbuck’s forward thinking and constantly enhancing the Starbuck’s experience has added to the success of the corporation. Starbuck’s had over $4 billion loaded onto the My Starbucks Rewards in fiscal 2013 year. (news.starbucks.com) Valuation defined as the process of determining the current worth of an asset or company ("Definition of Valuation ", 2014). Starbuck’s worth can be addressed using capital valuation models demonstrate the charts best. This paper will cover the current market price of Starbuck’s debt and their equity. The appropriate capital valuation models used Market Value per Share/ Earnings per Share (EPS) and P/S Ratio = Sales price/Sales per share with calculations supporting the findings will be provided along with any finds dealing with rates of return.

Current Market Price of Debt

One very important area that Starbucks needs to keep an eye really on is their debt especially in today’s environment in regards to customer demand…experiencing some of the lowest unemployment rates can really affect customer demand. However, with that being said interest rates are at some of the lowest percentages in some time. This allows for borrowing dollars less expensive than in previous years.

Starbucks focuses on financial discipline as it looks at opening 1,500 new stores along with the companies guiding principles. Along with the introduction of these new stores along with a new Tea line Starbucks has decentralized certain leadership functions along with other areas that need reviewing to ensure the company stays aligned with regions they support. Another area that Starbucks watches their debt or expenses is they purchase their products at fixed-price and price to be fixed commitments which ensures a secure...