Find and calculate the cost of each capital component

Assignment Help Financial Accounting

Reference no: EM132652272

Currently, the stock price for Apple is $112.00 USD. As of August 2020, Apple has 17.10 billion shares outstanding. For Insider Ownership, Apple's is 0.0% while Institutional Stock Ownership and Mutual Fund Ownership are reported at 59.6%. The most recent insider transactions within the last 6 months include: purchases of 774,211 shares, 360,912 sale of shares, Net Shares Purchased (Sold) was 413,299, Total Insider Shares held was reported at 11.29 million and the percentage of net shares purchased (sold) was 3.80%.

Apple's share buyback program started in 2013. Over the years, Apple has spent over $320 billion to buy back over 2.0 billion shares at a price of $131 per share. Just last year, Apple spent $55 billion on their stock buyback program, buying over $280 million worth of shares at an average price of $194 that were in open market transactions. According to Emily Bary from Market Watch (Bary, 2020) Apple has declined to provide any financial forecasting due to Covid-19 but are looking to provide an additional $50 billion towards buybacks and dividend increases.

Apple has strong ratios compared to industry average. This tech giant has the cash and liquid assets to cover its debt and quickly turnover its highly demanded products. Compared to others it has way more debt, so it is expected to see higher debt ratios. What stood out was that Apple has a very high ROE and ROA, which suggest that the company has tons of income and is well above its competitors when it comes to profit. If Apple can reduce its debt or continue to pay it back quickly, then Apple should have no problem remaining an industry leader.

Problem 1: Perform common size analysis. What does this analysis tell you about your company? Are there any trends apparent with either the industry or your firm?

Problem 2: Use the extended DuPont equation to provide a summary and overview of your firm's financial condition.

Problem 3: Calculate the cost of each capital component, after-tax cost of debt, cost of preferred, and cost of equity with the DCF method and CAPM method.

Problem 4: What do you estimate the company's WACC?

Reference no: EM132652272

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