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Second Project The purpose of this project is for you to have some prac±ce working with Fnancial concepts in the real world

Second Project The purpose of this project is for you to have some prac±ce working with Fnancial concepts in the real world. This will involve integra±ng 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 Frm using what you know about WACC as well as data you can Fnd through research. Your deliverable is to be a brief report in which you state your determina±on of WACC, describe and jus±fy how you determined the number, and provide relevant informa±on as to the sources of your data. With the help of your professor, you have selected a company for which to research and Fnd the WACC. Your research is to be independent from any informa±on you may Fnd at or similar sites although you might want to use such sites to provide a reasonableness check on the WACC you calculate. AssumpTons As you recall, the formula for WACC is r WACC = (E/E+D) r E + D/(E+D) r D (1-T C ) The formula for the required return on a given equity investment is r i = r f + β i * (R Mkt -r f ) R Mkt -r f is the Market Risk Premium. ²or this project, you may assume the Market Risk Premium is 4% unless you can develop a be³er number. r f is the risk free rate. The YTM on 10 year US Treasury securi±es is a good approxima±on. You may assume a corporate tax rate of 40%. One good source for Fnancial data for companies as well as data about their equity is h³p:// . By looking around this site, you should be able to Fnd the market capitaliza±on (E) as well as the β for any publicly traded company. There are not many places le´ where data about corporate bonds is s±ll available. One of them is h³p:// . To Fnd data for a par±cular company’s bonds, Fnd 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 was used to calculate WACC. This would be the formula and the formula with your values subs±tuted. 3. Sources for your data. 4. A discussion of how much conFdence you have in your answer. What were the limi±ng assump±ons that you made, if any

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February 12, 2018

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