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Essay / Research Paper Abstract
This 12 page paper examines the position of Mattel in late 2007. The paper evaluates Mattel’s financial management, estimates the weighted average cost of capital (WACC) for Mattel and then uses capital asset pricing model (CAPM) and the dividend discount model (DDM) to compute the fair value for Mattel’s stock, discussing how the models are used and why there are chosen. The bibliography cites 8 sources.
Page Count:
12 pages (~225 words per page)
File: TS14_TEmattel07.rtf
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Unformatted sample text from the term paper:
toys but picture frames. The scraps left over form the picture frames were the key to the future of the company, Elliott used them to make dolls house furniture, and
after Harold sold house share to the Handlers they decided to concentrate on the dolls house furniture. Mattel turned out to be surprise at the beginning, and from that modest
start it has grown to a company with a substantial product range and sales in excess of $5,650.2 million in 2006, as well as a gross profit of $2,611.8 million,
an operating income of $728.8 million and earnings before tax of $ 683.8 million (Mattel, 2007). The performance of the company appears to be fairly sound. However, as with
all annual accounts the figures reported historical and events can overtake company which are not reflected in yearnings. Mattel has suffered in 2007 due to a number of product recalls.
These recall some had a significant impact on sales. During the first half of the financial year ending in 2007 sales plunged to only $34.8 million a drop of 49%
(Sarafin, 2007). This may be an indication that there could be cause for concern. A 49% drop in earnings is a significant fall. In many companies this would have resulted
in share prices plummeting and investor confidence declining sharply. However, interestingly despite the recalls the current share price1, is not very different from the share price 12 months ago which
stood at $ 21.38 (Yahoo Finance, 2007). This is a rather simplified view as during the year the share price has hit a high of $29.71 and fallen again with
the current value of $20.552 being very close to the 52 week low of $20.97 (Mattel, 2007, Yahoo Finance, 2007). When viewed in this context the performance of the
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