User Account

All Pages

How data was used to calculate wacc

Assignment Help Finance Basics
Reference no: EM132207325

Financial Exercises - Your task is to determine the WACC for a given firm using what you know about WACC as well as data you can find through research. Your deliverable is a brief report in which you state your determination of WACC, describe and justify how you determined the number, and provide relevant information as to the sources of your data.

Select a publicly traded company that has debt or bonds and common stock to calculate the current WACC. One good source for financial data for companies as well as data about their equity is Yahoo! Finance. By looking around this site, you should be able to find the market capitalization (E) as well as the β for any publicly traded company.

There are not many places left where data about corporate bonds is still available. One of them is the Finra Bonds website. To find data for a particular company's bonds, find the Quick Search feature, then be sure to specify corporate bonds and type in the name of the issuing company. This should give you a list of all of the company's outstanding bond issues. Clicking on the symbol for a given bond issue will lead you to the current amount outstanding and the yield to maturity. You are interested in both. The total of all bonds outstanding is D in the above formula.

If you like, you can use the YTM on a bond issue that is not callable as the pre-tax cost of debt for the company.

Assumptions: As you recall, the formula for WACC is: rWACC = (E/E+D) rE + D/(E+D) rD (1-TC)

The formula for the required return on a given equity investment is: ri= rf + βi * (RMkt-rf)

RMkt-rf is the Market Risk Premium. For this project, you may assume the Market Risk Premium is 5% unless you can develop a better number.

rf is the risk free rate. The risk free rate is normally the yield on US Treasury securities such as a 10-year treasury. For this assignment, please use 3.5%.

You may assume a corporate tax rate of 40%.

Submit the following: Write a 350- to 700-word report that contains the following elements:

  • Your calculated WACC.
  • How data was used to calculate WACC. This would be the formula and the formula with your values substituted.
  • Sources for your data.
  • A discussion of how much confidence you have in your answer. What were the limiting assumptions that you made, if any?

Include a Microsoft Excel file showing your WACC calculations discussed above.

Reference no: EM132207325

Questions Cloud

What is the payback period of this investment : Stark Resilient Inc., has just invested $4,886,200 in new equipment. What is the payback period of this investment
Business model design and innovation : What are the challenges to "Business Model Design and Innovation"? (Be sure to clearly and concisely explain each challenge.
Name the five types of customer-introduced variability : Name the five types of customer-introduced variability and discuss options that let companies offer a high level of accommodation at low cost
Develop a communication strategy to resolve conflict : Develop a communication strategy to resolve conflict in the work environment. One of the key challenges for managers is to find adaptive communication.
How data was used to calculate wacc : Write a 350- to 700-word report that contains the following elements: How data was used to calculate WACC. Your calculated WACC
What does the ruling class do when it rules : As we carry our day to day activities to sustain our lives there are two may concepts that govern all these activities, capitalism and socialism.
Describe ellison personality characteristics : Using the Big Five personality factors, describe Ellison’s personality characteristics. How do these affect others?
How does remote access permission works : What could interfere with the ability to access a user's system? What is a potential risk remote access creates to the user or the organization?
Design of information systems at the interface level : In human-computer interaction, what are some approaches that are useful in understanding the design of information systems at the interface level?

Reviews

Write a Review

Finance Basics Questions & Answers

  What is benkart break-even point in units

Benkart's Tire Store has fixed costs of $220,000. Tires sell for $95 each and have a unit variable cost of $45. What is Benkart's break-even point in units.

  What is this firm debt-equity ration

Zombie Corp. has a profit of 5.1 percent, total asset turnover of 1.95, and ROE of 16.15 percent. What is this firm's debt-equity ration?

  How many years is it until these bonds mature

Redesigned Computers has 6.5 percent coupon bonds outstanding with a current market price of $832. The yield to maturity is 16.28 percent and the face value is $1,000. Interest is paid semiannually. How many years is it until these bonds mature?

  Determine income statements of finance companies

How are the balance sheets and income statements of finance companies, insurers, and securities firms similar to those of banks, and in what ways are.

  The relationship of bond prices and changes in bond yields

The relationship of bond prices and changes in bond yields?

  Find the burden of the estate tax

According to a New York Times columnist, "The estate tax affects a surprisingly small number of people. In 2003, just 1.25 percent of all deaths.

  How would the following ratios be affected by the accounting

In a period of rising prices, how would the following ratios be affected by the accounting decision to select LIFO, rather than FIFO, for inventory valuation? * Gross Margin * Current Ratio * Asset Turnover * Debt-to-equity ratio * Average tax rate

  Determine the equal annual end of year payment

Determine the equal, annual, end-of-year payment required each year over the life of the loans shown in the following table to repay them fully during the stated term of the loan.

  Determining present value

You decided to play the lottery & you were the only winner of a jackpot amount at $50,000,000. You contact the lottery and they make you the following offer:

  How much of the payment by the tenth year

can you explain why the figure change?if the interest rate doubles, would you expect the mortagage payment to double?

  Discuss the term authorized stock mean

Your friend, Jonathon Fain, is an engineering major with an entrepreneurial spirit. He wants to start his own corporation and needs your accounting expertise.

  How georgia okeeffe uses symmetrical balance in deers skull

Explain how Georgia O'Keeffe uses symmetrical balance in "Deer's Skull."

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd