Reference no: EM131090120
Project:
The purpose of this project is for you to have some practice working with financial concepts in the real world. This will involve integrating some material from throughout the course. The project will also involve the development of your own approach to doing the work. The project does not provide a step-by-step procedure for you to follow.
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 to be 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.
With the help of your professor, you have selected a company for which to research and find the WACC. Your research is to be independent from any information you may find at thatswacc.com or similar sites, although you might want to use such sites to provide a reasonableness check on the WACC that you calculate.
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-rfis the Market Risk Premium. For this project, you may assume that the Market Risk Premium is 4%, unless you can develop a better number.
rfis the risk-free rate. The YTM on 10-year U.S. Treasury securities is a good approximation.
You may assume a corporate tax rate of 40%.
One good source for financial data for companies as well as data about their equity is https://finance.yahoo.com. 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 https://finra-markets.morningstar.com/BondCenter.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.
Deliverable
Write a two or three page report that contains the following elements:
1. Your calculated WACC
2. How data were used to calculate WACC. This would be the formula and the formula with your values substituted.
3. Sources for your data.
4. A discussion of how much confidence you have in your answer. What were the limiting assumptions that you made, if any?
Assignment of american dream essay
: What is the American Dream? what did the new American Dreamers dream of? Is this dream just American? How does this dream show up in your world- if at all? What are the opportunities? What are the barriers? How do you/ people overcome them, in pur..
|
Reimburses loses on an actual cash-value basis
: The coverage age of the damaged personal property was 5 years, and it's useful life was estimated to be 15 years old. What is the maximum amount the insurance company will pay Lizzy; assuming that it reimburses loses on an actual cash- value basis?
|
Total amount of interest that was paid
: Now, one year later, your aunt must file Schedule B of her tax return with the IRS informing them of the interest that was included in the two payments made during the year. (This interest will be income to your aunt and a deduction to the buyer o..
|
Consider a file system that manages a 16 megabyte
: You are asked to choose the largest block size with the constraint that the average internal fragmentation be less 5% of the total number of bytes stored. Show your work.
|
Limiting assumptions that you made
: 1. Your calculated WACC 2. How data were used to calculate WACC. This would be the formula and the formula with your values substituted. 3. Sources for your data. 4. A discussion of how much confidence you have in your answer. What were the limiting ..
|
Does this system have internal fragmentation
: Consider a file system that uses contiguous allocation, as illustrated by Figure 10.35.
|
You include in your company e-mail policy
: 1. Do you think that companies should have the right to read employees' emails? 2. If you owned a company, what items would you include in your company e-mail policy?
|
What are the implications of the timing of home-leaving
: In this study, Aquilino examines the effect of childhood family structure on the timing of home-leaving. What are his findings? What are the implications of the timing of home-leaving for children's life course
|
Design a minimal-cost positive-logic address decoder
: Design a minimal-cost, positive-logic address decoder for a device at addresses $7000 to $7FFF,
|