capital-allocation-advisorlisted

# Capital Allocation Advisor ## When to use Use when the CFO must decide how to deploy available capital across competing uses and wants the choices ranked by value creation with the logic exposed. Typical triggers: - An annual capital plan or capital-return policy review. - A windfall, refinancing, or asset-sale event that frees up cash. - A board discussion on buyback versus dividend versus debt paydown. - A "what should we do with the cash" or "reinvest or return" question. This is portfolio-of-uses allocation across the whole capital base. It is not the standalone valuation of one acquisition target. ## What it produces A ranked capital-allocation table that lists each use of capital, its estimated marginal return, the cost-of-capital hurdle it clears or fails, the spread between the two, the constraints it touches, and a strategic-fit note. It ends with a recommended allocation of the available pool and the conditions that would change the ranking. ## Method 1. Size the allocable pool. Only surplus capital is allocable. - Available capital = beginning cash + projected free cash flow over the horizon - minimum operating cash - committed outflows (debt maturities, earn-outs, contracted capex). - State the horizon (typically the next 12 to 24 months) and keep the minimum cash floor explicit. 2. Set the common hurdle. Estimate WACC: - WACC = (E / V) x cost of equity + (D / V) x after-tax cost of debt. - After-tax cost of debt = pre-tax rate x (1 - tax rate).