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Estimate the wacc for south jersey industries

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Reference no: EM133172564

Question - Estimate the WACC for South Jersey Industries, the natural gas utility that serves natural gas to much of Southern New Jersey.  The recent Value Line Sheet for SJI is also posted.  You can also get financials for SJI from Yahoo Finance.

1) Obtain the long-term debt and common equity ratios from their balance sheet.  Utilities are one industry that uses BOOK value ratios to get WACC.

2) Obtain the bond yield for SJI traded bonds, estimate the CAPM and DCF methods for the cost of common equity and average the two.  You can use either the projected EPS g in Annual Rates on the VL sheet or go to "analysis" in Yahoo and get the long-term growth rate in EPS for SJI.  Combine the averaged cost of common equity and cost of debt (yield) using the debt and equity ratios to get the WACC for SJI.  Do not adjust the debt cost by (1-corporate tax rate) as taxes are included in the revenue calculation as shown above for utilities.

Reference no: EM133172564

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