Week 3prjs synco_solutions only | Business & Finance homework help

Company Cost of Capital Analysis

Connect with a professional writer in 5 simple steps

Please provide as many details about your writing struggle as possible

Academic level of your paper

Type of Paper

When is it due?

How many pages is this assigment?

In this assignment you calculate and interpret the cost of capital for your selected company by conducting a detailed analysis of the company’s Weighted Average Cost of Capital (WACC).

 

You should select a large publicly traded company (such as Microsoft, Google, IBM, Disney, etc.). Please select a company that has been public for at least 3 years.

 

1. Calculation of WACC

You need to identify each component of the WACC formula and calculate the overall WACC.

The WACC formula for a company that uses debt and equity is as follows:

WACC = % Debt * Cost of Debt * (1 – Tax Rate) + % Equity * Cost of Equity

You should use Yahoo! Finance to identify all financial statement inputs. You can use the following guide for the inputs. The specific financial statement data are found on the relevant financial statement.

  • Debt = Long-term Debt + Short-term Debt (on Yahoo! this is called, “Short/Current Long Term Debt”)
  • Equity = Market Cap. (This is on the Key Statistics page in Yahoo! Finance)
  • % Debt = Debt / (Debt + Equity)
  • % Equity = 1 – % Debt
  • Cost of Debt = Interest Expense / Debt
  • Tax Rate = Income Tax Expense / Income Before Tax
  • Cost of Equity: Use the below CAPM equation to calculate this

    Cost of Equity = Risk free rate + Beta * (Market Risk Premium)

    • Risk free rate: look up the yield on 10 year US Treasury bonds
    • Beta: This is on the Key Statistics page in Yahoo! Finance
    • Market Risk Premium: Assume 11% minus the risk-free rate

2. Interpretation of WACC for Your Company

Indicate what the WACC value you derived means for your company. What role does the WACC play for company managers when they are evaluating new projects to undertake? How would company managers and investors use the WACC for an overall company valuation analysis?

3. Paper Mechanics

Please complete your work in Excel. For the calculation section of the assignment, each parameter, its data and the corresponding calculations should be clearly indicated and easy to follow. Your spreadsheet should be professional in its presentation with appropriate formatting and organization.

Looking for a Similar Assignment? Let us take care of your classwork while you enjoy your free time! All papers are written from scratch and are 100% Original. Try us today! Use Code FREE20