AAPL US $ Market P168.30/168.33Q Prev 165.30 Vol 3,404,636 AAPL US Equity 1) Create Report 2 Output to Excel Apple Inc Cost of Capital - Current Market Value Weight Cost Wx C 3) Equity 94.6% 10.0% 9.5% 4) Debt Cost (A-T) 5.4% 1.3% 0.19% 5) Preferred Equity 0.0% 0.0% 0.0% WACC 9.6% Period MR 3x2 2021Q4 Capital Structure (Millions of USD) Market Cap 2,413,423.4 94.6% ST Debt 17,141.0 0.7% LT Debt 119,381.0 4.7% Pref. Eqty 0.0 0.0% Total 2,549,945.4 100.0% 6) History WACC Economic Value Added (Millions of USD) EVA ROIC EVA Spread 7) Net Operating Profit 108949.00 11.50 Track Annotate Zoom 8) Cash Operating Taxes 9576.68 11.00- NOPAT 99372.32 WACC 9.5763 10.50- 10.00- 9) Total Investment Capital 212685.00 9.5763 Capital Charge 20367.41 9.00- 8.50- Economic Value Added 79004.91 8.00- 7.50- ROIC 46.72% '12 13 '14 '15 '16 '17 '18 $19 20 '21 EVA Spread 37.15% After graduating with a degree in finance, you land a job at Apple as a financial analyst. The first project to which you have been assigned is the valuation of a potential acquisition target. Apple is considering widening its competition with Amazon to include big- box retail sales. To that end, Apple is exploring the purchase of a mass merchandiser that is likely to be valued at around $115 billion. You have been asked to retrieve Apple's WACC as it is often used as the appropriate discount rate when valuing acquisition targets. Sitting at a Bloomberg terminal, you pull up Apple's current WACC. Before sending the WACC to your manager, you pause and ponder the following questions: 1. Is it appropriate to use Apple's WACC to value this target firm? Why or why not? 2. Will using Apple's WACC as the required return cause us to make a bad investment decision? Why or why not? 3. If we choose not to use Apple's WACC, how can we come up with an appropriate required return for this investment? 4. What would be the most challenging aspects of running an analysis to come up with the appropriate required return?