Determining the Cost of CapitBEGINNING+OF-CHAPTER QUESTIONS sd the chal, consider how you would ale and make vale weigh and the rol of apts: Rae, you shuld we hemo get ae yu should beable a give at asp _mting he cso ety al the CAPM, 0 DCE, equations, and you shod be sland (the bond ye plu premaan, Whe iloiteyouranower Weise Neanowers robod bet thn the alco does te ‘nceing the odel and working ough t 5. How do Maton costa aet Ie onto capital 25 the fm raises lager and ager arounis of Capital and how do lettin cost aft the ay 3 company ass capital Fam ea oye? 6. Fora ghen fir, why does WACC change ove tanger in the WACC. and thus determine ‘any one tne, shuld the same WACC be usd tow cch ta company api Deng som Hpac aerate ta a Sing cial a corny oe inwhy thse dit. oir eta eat mis (laa anaes In Chapter 1, we tld you that manages should capital ACC. Inthe previous chapters, we jet make thelr more vlusle and that _ examined the majr sources of fnancing tock thevalc off determined by thes, tin- bonds an prefered oct) on an Indiv ng an sk of fs free cash lows FCP) In par- basis, In this chapter we put thse pieces icon afi’ ale the present valve of ts together and estimate the WACC CFs, kcunted athe weighted average cet fer, + WACO10.1 THE WEIGHTED AVERAGE COST OF CAPITAL SelkTeer Questions 10.2 COST OF DEBT, rg(1 — T) wnat 9 te terms “cost of capital” and “weighted aveege coup pial” mean? osible to finances company ent tomo equ panies euply several ype of capita ‘ania components, with common and prefered werk al three mos frequen wed types, Some companies, epcialy thos tn fogs fnnde lege amounts of shortscrm debe inthe capital uctres- A components have one feature in cotnnon: The inves wh provid woul be the rege rate of eur om sty. Homes xt types of expt and, doe wo diferent thse ferent css ferent required atesof return. The egucd ite of return on cnc capt compo ‘scale is component cox, andthe eo expt sed to anaes capital body 10%), bat ele ‘et ‘rj ate of eur ses than coe of capital (13% < 14%) 0 hoa be ois Fejeoed. However fone imply compared che to projec reruns wth Sarights ni _ veal eos of capital then the bakery’ ale-aing project woud be ejced while the ene valuedestroying projec would be accepted.Jn recall hat he Security Maret Line equation express she As an example, consider the case of Huon Steel Company inert dcer operating in the Great Lakes region. For simpli, ss that Ha ‘only one division and uses only equity captalyso costo uty is ha fae cost of expt o¢ WAC, Haron bea b This suggests that invests shou be willing to sive Hu By average risk we mean projets having risks to the fms exsng divi ‘Now suppose Huron crests a sew transportation division consisting of a of barge oul con ore, and bare operations have betas of 13 tthe thoy The barge dvison, with b "13; has a 16.0% con of eat te = 7% + (HLS = 16.0% (the other hand if Huron adis slows vision, sch as «sew de ‘ener witha beta of only 0.5, divisional ox ofeopil would he 1090 7% + (HDS = 10.0% A firm inselfmay be regarded a portlo of asses" ad ines the bes ofa por folio sa weighed average ofthe Beas ot nda suet nding Se bare Alisibution ener divisions wil change Huto's ove bea The act ae of oe new beta would depend onthe relative size ofthe investment i he new divine ‘emus Huron’ original se! operations. If 70% of Fron total value ends the steel division, 20% inthe barge dvson, acd 10% inthe dibusion cee then ts new corporate bea would be New bet = 07.1) + 0241.) + 0.105) = 142 Ths, investors in Huron tock woud havea reqied eur of on = 7% + (6%4)L12 = 13.72% Eventhough the investors regi an overall reat of 13.72% they expec tate of rurn each division alent good as he division’ reer sal onthe SML-In parca they exper a recta of at east 13.6% rom he se di son, 16.0% from the barge dion, and 10.0% from the dseibuon vente Techniques for Measuring Divisional Betas In Ghaper 2, we dicised the eximation of beta for stocks and indicated the i ‘cues in etinaing bes The etmaton of vsonal betas ig ch more dice sau Gvsions donot have the ow publ traded ckvata ‘cote Dep ae mi the ie sitll The Pare Pay Method. Inthe pare pla tho the company ris to find several single-product companies inte Seine of and then averages those companies betas to detenmiethe cost eal fori ‘own desion. For example, suppoe Hon oul id three extn sage prod fr thar operate barge, and suppose ss that Hurons managenent bles ‘age dision wocld be sujet the same sks those fits: Horn could then 3H | | F ‘of chumb”is uot vey satisfying theoretically, because we don’ know exactly bow | th snasts make ass ligidyadjusinen fe any smal cot afatocece | 10.14 FOUR MISTAKES TO AVOIDwren 4% ate on Ponds and then we 12.8% ~ 4% = 8s a ihe trget weighty is beter to eatimate weighs based on the atl Imatket values ofthe eapal components han on this bok vales Ths Sally tue for cou, For example, the ack ofan average SECP D0 he Spring 2008 had market vale that was abou 3.66 ness book vale, i general sock’ markt vals are rarely clove co thelr book vale, i Company’ debe is not publi traded then itis easonable to ne the book val ‘of debt to estimate the weight singe book and marke ales of dees Shores deb, are usually cose to ane snother. To summary dei knw the target weights, chen ie market vale of ey rather than book a 4. Alas remember tat epitalcomponents ar unde that cme from nesta Irate at rom an investor then Ws not a capa componei. Soretine il argument sade that accounts payable and acruals should be include ne ‘alulaton of the WACC. Howevey, thee accounts re not funds fay inventors Insead they ace due to opecating relationships with supplies aad finployets and they ae deducted when determining the fee ca a Therelore, they should nox be included in the WAC, since hey are incl when calculating FCF Setow Quentin Wha SUMMARY This chapter showed how the cost of capital i developed for ws in capa bade ing. The key conpts covered ae Usted eon ‘+The ost of capital ed in apt budgeting is weghted average ofthe pes feat the frm se, rypcaly des, pefeeed stock, and common eq + Thocomponent cost of dee isthe after cont of new dt eis fv by mal Shing the cow fnew debe by 1 Th whee fhe is marginal ax ae mu | + Hlaton cost adjustments should be made for debt ifthe Fotation cos ate Felitivel lage Rede the bons ve price by the Aotationexpenis, rede the bond ah flows to elect taxes, and then solve forthe afer ill (0 + The component cost of prefered stock i caledated sx the prefered dividend divided by the ner sing pri, where the et sung pice ithe peice the firm festves afer deducting tation costs ty, = Dy/@yfl Bl. Hotation cows re usally elatively lage foc preesed ck sts, 20 we pial include he impact of fleration oe 1+ The cost of common equity ls cal the cost of common stock Is he rate of tun segue bythe fis stockholders, and it ean be eximated by thie methods: () the CAPM. approach; (2) the ddendsi-plar- grows tate or DCE approach; sn (3) the bond yd pls premium approachdp febace ide sidend ‘etm dee + To use the CAPM appro, 1) ene the fons bets, (2) py dis beta bythe market tsk prea to deci the Fn isk prema a (3) ed ‘hen se prem eo che kfc ater oes the oat oro stock = oe = RE “The tse proxy for thee free rat the id on longer ond To use the ddend-yld ple growtate approach, which also called she Aiscounied cash flow [DCF approach, a th rns expected growth rte 0 ‘expected ive yl, ~ = DyfPy Web Extension 108 shows how {State the cost of equity if vidends ae grovting as nonconstant ae, he growth rate ea be extated from hori earings aad didends or by ue ofthe eetetion growth model, g = (1 Payouteira on exuiy, 0 Gn be based on anal forcass, Web Extonson 108 desciesferent el nigues fr etimating growth ate ‘The bond-iel-plrsk premium approach calls for adding ck semi of 303 percentage pons to the f'n atom longin debe = Bond Yield + Hood tk premium, ‘hen elelaing the cost of new coonmon sok, cy the DCF approach can be sdaped to acount for Meaton conte, For conttant growth tock this cet fan be expesed as eg = #2 Dy/fPyll ~ FY) +. Nee that Hoton costs Esch frm has a ttt capital structure, fined as chat x fd, peered Stock ad common equity that iiices te weighted area costo egal (ace) WACE = wall —T)+ Were Wate Varo factors affect im’ eos of capt Some of tes fcr are dete smined by the Finanil enviroment, but te fi fnancig, investment, and dividend pelces Maay fms eave a ivsonal oe of capital sat elles each divisions sk tnd expat. The pure ply and accountng beta method can sometimes be wed to estimate beta for age proets or for dvisons Aprojct stand-alone isk th ik the projec woul aves iwere the fis ony ase and if stockholders eld nly hare wack. Sand-lon sk mea ‘red by she airy of the see expected tears Corporate ce withi-ira,isk vec the eer of» projet om the fim ck, andit i measured bythe proj elect onthe firms eanings vai. + Market, or etree he fects ofa projas on the risk of socoders, suming they bold diverse porfolos. Masher rik measured bythe 9h ‘fect onthe fms beset ‘+ Mos decision makers consider all three risk eases in judgmental mannee and then classify projcs ito sabjertive ris catego Using the divisional ‘WACC as staring pin, sk adjuned coms of capil ace developed for ach nage The rleadheted cont of epi te ox of capital appopeae fo given projet given th ck ofthat project. The greater thei the highs the cof cpt Fins may be aber use the CAPM to estinate the coe of capital for specific projects or divisions Howeves estimating betas for projec dil The cos of capital as developed i ths chapter ed inthe following chapters 0 Aetrmine the vale ofa coeporation and vo evlunte capil budgeting pete, In dion, we extend the conegt developed hare in Chae 15, where we comside: (he eet of the capil rere onthe coat of capitalQUESTIONS B Goof pele tease ofemsmon eat cox of oon Hotton cos, Fy ow of new excel como esi 102 In what ene the WACC an average cos? A marginal cost? 1053 Hom would eah fee follwing affect fn’ cost of deb, 1 — This ca gui and is weighed average cost of capital WACC? lade bya pls (sh min ifthe ctor would ras, lower or havea inden ‘ffect onthe tem in question. Assume oter things are hed comsant. Be prepa ot pine ha seeral of che pars prob sar designed o atime thought a ttt On: ighere cet - _ = 10-4 Distinguish berween bees (or matket ik, within fo corporate risk, and stand-alone rik fora potential project OF the tee measures which theresa ‘he most reevant and why? 1055 Suppose afm estimates ts os of capital for the coming year to be 10%. Wha might be reasonable cots of pal for average is highs and Kwik projec? PROBLEMS Answers Appeae in Appendix B Easy Problems 1-8 10-1 AltewTax Cost of Deb Calelte the afertax cost of under each of he fo Inert cate, Interest. cree © Intestate, 13%; ex te 35% ax rate 0%Aen Cont of Debt LL. Incorporates carey outstaning rons havea yield to matuity of 8%. LL beleves could ase at pa pew bonds that would provide simile yl atu is magial tax ete $595, what (Cos of Prefered Stock Duggins Veterinary Supplies can iss perp pefered Stock at pice of $50 share The ef cxpeted to pay a cosant aa de fered stock ra? Cont of Prefered Stock with Fottion Coss Bunwood Tek plans to sue som 60 par preferred stock with 8% dren The stock i seliog om the matt for $70.0, and Bunwood mus pay flotation soxts of 3% of te marker pice What i he cs the prefered stock? Cos of Equity: DCF Surmmerdah! Resor’ comin stock is curently tang S364 shart. The stock isexpesedto pays dividend of $3.00 share atthe end of ie year (Dy = 83,00), andthe dividend is expected to grow att constant ate of Cou of Equity: CAPM Booher Book Stores has beta of 0.8, The yield on 3 3nonth ili 4%, andthe Yel on 10-yexe bondi 6. The marke ek pre ‘ium 5.88, bat he stock take carn ite previous Years was 13%, Whe the existed ont of common equity ting the CAPM |WACC $hi impor balance shee shows $30 lion in db, $50 milion in pe fered sock, and $250 milion in toa common oy. Sh faces» 4U% tx ete and the following dat: rg = 6% ty = 5.8% and = 12% Shas a eaepet cpt suuctte of 30% det, 8% preted stat and 68% common sock what S's WAC David Oniz Motors has a tree capital strscue of 40% debe and 60% ‘equity. The yield to matariy on the company outstanding bonds 3% and the Company’ x eae & 40%. Onis CPO has called the company's WAC: a 9196% What isthe Company ost of equity espa Intermediate Problems 10-14 Bond Yield and After-Tax Cost of Debt A companys 6% coupon ate, semiannual ‘payment, 1,000 par value bond that matures in 30 years sella pie of 31516 {Thecompany’s adel pur stat ta rate 40%, What ithe fi fers com ponent cos of dee for parposes of aula the WACC? (Hine Base yur answer fon the mominl rate Cou of Eauity The earings dividends, and stock price of Shelby Ic ace expected to glow at 7% per yeaein ths fru Shelbys common sock sls fo 823 pr shane is last vidend was $2.00, andthe company will pay a dvidend of 3214 ate end 4 Using he discounted cash flow approach, what isis cost of equiy? 1 Irthe im’ bets stele rte ey and the eapected feten on he smasker i 15%, what will be he fr cout of equity wing the CAPM sppeoach> ifthe ims nd cama rer of 12%, what wll, be sing the bondi "sk pemiam approach? (Hine Use the midi of he ik premium range) (On the basis of the cess of part though &, what would you este Stl’ on of equity tobe? E14 ov of Boiy Radon Homecare EPS ig $60 wot $44 fi yon apy The compen py out 4% of earnings an cindy nde sk se 0 Calelate he pose growth rate i earings. (Hint: This i a Sear y period 1, Cate the net expected dividend per share, Dy (Hn $2.60), Assn tae the past growth rte wl contin & What sth ost of epi for Radon Homers Caletation of g and RS Spencee Supp’ stock i cu share. The Bent expected tn exen §5. “dvigend of $3.60, iy sling for $60 per share ds yea sd pay 3 est 0. investors roeie 4 9% rem, what rate of growth mast be expt fo Spence? 3 Spee reinvents caning in rojo wih average rears ial tthe stk ‘expected ae of ete, what wil be next year's EOS? (ins = ROBIRetoes The Cos of Equity and Hotation Coss Messman Manufacusing wl ise com Ion stock to he publ for $30. The expced dividend an pris in divine $3.00 pe shar and $% espactvely ithe oration cam ie 10% of te na ed, what the cost of exeral sui The Cos of Deb and Flotation Costs Suppor a company will ue now 20-year debe with «par value of $1,000 ands coupon cate af 996, paé somal Te fate is 40%. the flotation cost 2% ofthe une proceed Challenging Problems 15-17 WACC Entinaton On Jonuary 1 th otal marke vale of th Tssland Company ‘as $60 milion. Dig the yea the company plan nase and ieee $30 tg i new projects. The fms present sackt vale capital suse, chews boon onsidered tobe optimal ASsame hat thre iso sho en dese Conn ety 30,000,000 New bonds wil have an 8% coupon rat nd they willbe soldat par Common stocks erent ling at $30 share rockboldes vue tate sons ee rated t be 12%, consisting of s dividend yield of 4 and an expec cossant ‘roth ae of 8%, (The next expected dividend ie $1.20, 00 $1.20/850.= 480) hs Marginal corporate tax rates 40% rss be nance by common egy? 3. Assume ther is slice as lw uc tht Tyseland can maintain seat ‘nial sesere without isuiagsddsionl shares of ety Whats he WAC © Suppose sow that these isnot enough intra cashflow seta finn mast issue new shares of stock. Qualtatvely speaking, wha wil happen te the Wace?inn0 Teale $20,900.00 The current ilies consis em of noes payable to banks, andthe neet ae hs debt i 10%, the sae he rate on ser bank oan These bak loans ee ot asd for seonal iancng bu instead ae pt ofthe company's permanent {pital race: The longterm de consis of 30,00 bond each of which bas « fet vale of 81,000, cares an annsal coupon ings ete of 6% and nats 2 year The going cate of inerexton sew longterm debt tis 10%, and ths the preset yell to rst onthe bond The common stock sells at ec of S60 per she Clelate the fit market value epital sera, [WACC Estimation A summary of the balance shet of Teves Inn Tne (TD, company that was formed by merging + numberof opona mote chins an that hops otal Holiday Ton on the national sen, sown in the following table Traveler nn: December 31,2009 (Milions of Dallas) These facts ae also given for TU: 1) Shoes debe consns of bank loans thie curently cost 10%, with interest pajble quately. These loan teed to finance rcevble and investors on {seasonal bats so the of seavon, bank loans are 20of tq ~ 12%. If new bonds were sold they would yreld investocs 12% * flotation cost to sell it, ® bd, 85 $009 $000 2003 ga7a $000 959 010 amo ator 130060 Assume tha you ae recently hired financial saalyst, and your boss, he {rasures has asked yuo etinate the eompany's WACC,sseme'ny see ey will be ised. Your cos of capital sould be appropriats for moc we Galen ross thot ae in the same risk class a the fem’ average ants noe a he bookSPREADSHEET PROBLEM Tull a Model WACC Sear withthe part model in the file JEMO Cb10 PIs ula Models onthe rextbook’s Web se The stock of Gao Comping sll fo $50, and lst year dividend wa $2.10. A locaton cent of 10% wold be eed Co tsa new common stock. Gao’ prefered sock ays dividend of 3.30 per share and new prefered could be sod st a price ont the cmnpny S30 pe share Secu analysts are projecting thatthe common dividend wil row aa rato a year The firm cn also ise adtenal longterm dee aan interest rae ( before cos of 10%, and ts narginal tax rates 39% The marke ak pen is 6%, cherie ate 6.5% and Gas bets 083i its conto apa a lations, Gao wes target capital rctre with 45% debt 3% pried tack ad 4. Calculate the cost of eich capital component hat isthe afte cast of eb the cost af preferred ck (inlading lloeton eos), and the cose of gy ignoring lotton coms) withthe DCF method andthe CAPM method, Calculate he cos of new stock using the DCF model What is the cost of new commoa stock, bused onthe CAPM? (Hint: Find he Aifferencebecween rand ras determined by the DCF method, and 24d eh {Atieential othe CAPM ve fort) 44 “Assuming hat Gao will oe nue ne eiy and wil continue to we the same targer eaptl rare, what ithe sompanys WACC? Suppose Gao i evaluating the projects with he folowing (1) Bach projet hs cost of $1 milion. They wil sl be fnanced wing hea set mix of loggseam db, peered sock, and common est. The cost of {he common equity for ech projet should be Based on the bes esti foe the prox. All eq wil cone om sineted ethngs. (2) Bguiy inves ie Projcr would have beta of 0.3 aed an expected of 3.0% (9) Equity insted ie Project B would have 2 beta of 1.0 and an expected rerun of 10.0% (4) Buty invested in Poet C would have a beta of etn of 110%, 0 and an expected Analyze the company’ staan, and explain why each proict should be accxped ejected TI PROBLEM & Calculating 3M’s Cost of Capital 1a this hater, we described how t eximate a company's WACC, which i the eid average off cons of debe, peered ck and comnoe su Most tthe dat we need to doth con br found in honson ONE: Her, we wal through the nepe ued to calla Minne Mining, & Manuiactaag’s ‘oan WaceDiscussion Questions fom longternsebe, pelted tock and common equity we chsh ne FINANCIALS, we can se imestly fom the balance shox the snout ot MMos longterm de and common equity (ar of mid-2008, MAIN had og prefered stock). Aleraatiey you ean sk on FUNDAMENTAL RATIOS he next cOw tabs below and then seer WORLDSCOPE'S BALANCE SHEET RATIOS. Here, you wl seo nda vee measure of longterm deb Recall thatthe weights used inthe WACC are based on he company arg capil srocture If we assime he company wats to maintain the sere mi capital tha caren hs oni balnes she, war weights should yo a "0 estimate the WACC for MMING fla Chae 13 we wil se that we igh ave a diferene estimate or thee weighs we neat asin that Mt bases its age apa sacar on the marks values of debe and ety, han the book values) 2. Once again, we can use the CAPM to estimate MMM cos of cai. Thoms (ONE provides various esate of beta~alet the measure that You bee bec and combine cis with your etna ofthe rece ete and the mack "sk premium obtain a eimai con of uty. (Sethe Thomon ONE exercise for Chapee 2 for more details What your etme forthe cs of ‘guiy? Why might not make mach ene tse the DCF approach to tat MMM cost of eau? ext, weed 0 calealate MMM cost of debt, Unfomunately, Thomson ONE oss provide a dec meatere ofthe cout of deb. However we ca aed ferent appcoaces to etinate One sppreach bs ake the company’ log teem intrest expense and divide ie by the amount of longterm debe. Ths approach only works ifthe hitoricl cot of debt aguas te eld t macaty in today’s market (hat if MMM ouetanding bonds ae wading clos Pau). This approach may produce miseadng esate in ons in which MIM sues a signa amount of new debt For example if company ies alt of dbs athe end ofthe yea eh fall amount of deb wll appear onthe ened Blae shy, ye we sl ay ot cea sharp increase in intext expense onthe annul income sateen, tins "he debe was oustanding for enlys smal portion of the ete pore When his siuaion occu, the erated cost of ett wil ikelysndrtn the te soot date, other approach i ro try to find thie mb in ce noes to the com anys anneal report by accessing the company’s hone page ands Investor Reltions section Alternatively, you en go 0 other exenal Suter, uch vwwbondsoalinccom, for corporate bond spreads, which canbe ued to fad zimaes ofthe cont of debe. Remember tat you need the afteress coat of debe calculate a fms WACC, v0 you wl eed MMM ox tte hich a Averaged about 37 percent in een years) What fe yout etna of MMA tent com of debt 4 Parting allthis infomation gether what i your estimate of MMs WACC? ow confide are you in this ena? Explnin your sasweril MINE weg ive rk TONE tal ONE vedi vo MM ‘char find ca ol ae Mts lat ew yrs Hatry Davis Indust ns fel ee een sitalinverments Reel, though have been delnng, andthe company o Took seroaly at major expan as bear proposed by the makeing Finca vce pein. Your Bit ask ea. oes pre wih the following ts, which she belres ‘rent price of Hasty Davis 12% ee eel eye eee pee a eee a $1,153.72, Harty Davis does not we shot. ten ineestheing dee on 3 permanent ass New bonds weald be peat placed The caren price of he fm’ 10% $100 par alee qual dividend pepetal peered sock $1165. Hary Davis would incur Hotton coat equal to 5% of the proceeds Hutry Davis common sock is caren sl ing 850 pe ae as vided Dy) was ‘419, and dsdends are expected nsrow at s constant rate of So in the fcesceable Tate Hay Davie Beta 1.2 the yd on “Ponds i796 and he mates ik prea, is cminted to be 6%. For the bond yield Dusrisk-premiam approsch the fm es 4 percentage pone rk pri. 9) Harry Davis’ target capital svete i 30% Tongtemn deb, 10% prefered stock, and ®srucrre the tsk somewhat, Jones has asked you Ic answer the following queso. What sources of capital should be incladed when yu estinate Hasey Davis weighed erage cor of capital (WAC)? Shoal the sompanest costs be figured on fore sax ora afer x basi deb ad is component cont of debe? (1) What the fs cost of preferred stk (al Watyeretpetres, ld to lavenors slower than the ld to maturity onthe deb. Does ths seg that you have mide a cistke? (Hie Think (0) What are the tw primary ways sompanics (2) Why is there ou sociated with invested (3) Harry Davis doesn plant sue new shies ‘common tock, Ug the CAPM appoach whats Hay Dots tome owt fae (0) Whats the estimate cox of equity axing the dlecounted cath flow (DCP) approach? Seppo the Firm harlem 15% fon equity (ROE) and retined 35% of cn ings and iver expe thio oon tive in he fut. lw could you ose ths ition 10 ela the Gta deen ‘owt rate, and what growl te wold yo tet Isthisconsien wth the Se grove rate (3) Could the DCF method be appli if the eth rr ws ck eases Fw ‘What isthe cos of equity based on the bond pierre eae Whar is your final estimate for the cout of ‘What is Hay Davis weighted average cost of capital (WAC)? ‘What fst inlucce a companys WACC? Should the company nse the composite WACC as the hurdle rte foreach fis isons? What procedures are uted wo determine the risk djsted con of capil fora puticlar diison? ‘What approaches ae used co meas a divisots heepeed in estab necbased projet sts have on average the alo ‘eke pally 125 py ha oz, “Given this in estimate he fo Whacare thee typeof sak wed Explain in words why new raed exerally hat hig vison cow of capital ote ct ik? How is each 1) Hany Davis estimates that if i iy a sock, the Notation cos all 2) Suppose Harry Davis ious 30-yenr gl apr vl 10 a isthe afer cost of debe for Sei What four common iistkes in estima YWACC shoold Hay Davis soi? Goenpany and Can #1, "Prese