Bloomberg CASEO Businessweek STUDIES 4 Weighted Average Cost of Capital Analyze how the theoretical concepts This lesson explores how several companies and industries are of weighted average cost of capital capital (WACC) formula. To apply WACC learning to real work impacted by changing variables in the weighted average cost of (WACC) connect to the real world by complexities, we will examine how Boeing is impacted by inter- exploring the impact of changing WACC est rates in class and then apply the same lessons to Disney for homework. variables on a company. WEIGHTED AVERAGE COST OF CAPITAL / BLOOMBERG BUSINESSWEEK CASE STUDY Case Study Notes ments G. ratings, and WACCs. Companies within the same sector typically share similar capital RISK FREE RATE structures and costs of capital. For example, most power utili- The risk free rate is the U.S. government bond. A U.S. bond's ties are engaged in fundamentally the same business; genera- yield is considered risk free because the U.S. has not and is not tion, transmitting, and distributing electric power. The utility expected to default. business is highly dependent upon expensive fixed-asset invest- .e., power plants) which are often financed with debt. TAX RATE Consequently, analysts expect companies within the same sec- The company's tax rate impacts the after tax cost of debt but tor or industry to have similar betas, capital structures, bond has no bearing on either the cost of preferred equity or com- mon equity. The higher a company's tax rate the lower the after Disney is a diversified entertainment company. Its diversi- tax cost of debt. Consequently, as a source of capital, debt is a fication exists because its revenues come from four different, tax shield. but related, business segments-parks and resorts, studio enter- tainment, broadcasting and media, and consumer products. PRE-TAX COST OF DEBT Since there is no other enterprise quite like Disney, we exam- The pre-tax cost of debt can be determined by calculating the ine the WACCs of companies that operate within one or more yield to maturity on the company's bonds. A bond's yield to of its segments. maturity can be influenced by many factors including inflation, Beta credit quality, macroeconomic fundamentals, and how the com- The beta of a stock is a representation of how the stock moves pany's bonds are structured. with the broader equity market. Disney has a beta of 0.96 which implies that when the broad equity market goes up or down by one percent, Disney's stock will rise or fall by 0.96 percent. Low beta stocks, between 0.5 and 0.8, tend to be defensive. They do not rise much when the market rises, but they also do not fall significantly when the market falls. Disney's beta indi- cates a closer relationship to the market than any of its peers used in this case. Betas of Companies Comparable to Disney Segments All Data as of July 31 2019 146 1.60 1.40 1.21 1.20 1.10 0.96 0.89 0.86 0.92 0.77 0.81 1.00 0.80 0.60 0.40 0.20 0.00 Disney Cedar Fair Lion's Gate Viacom Net Six Flags Sally Beauty GameStop EXPECTED RETURN OF THE MARKET The expected return of the market is a fairly general observa- tion. In reality, no one knows by what degree the stock mar- ket will rise or fall over the next year. Nevertheless, in order to assess an individual stock we must have a view on where the broader market is heading. The expected return of the market is the same for every stock. Bloomberg L.P. WEIGHTED AVERAGE COST OF CAPITAL / BLOOMBERG BUSINESSWEEK CASE STUDY Case Questions Use the Terminal Tutorial to calculate Disney's weighted average cost of capital (WACC) for Q1 2019. Bloomberg includes more elements in the WACC calculation than the textbook does. For our purposes, use the textbook formula with the data points from Bloomberg. Use the Bloomberg Terminal to gather the necessary data to make a similar calculation for Q2 2019. * Using the Case Study Notes and the accompanying spreadsheet, calculate the WACC of each Disney segment comparable. Describe the primary WACC drivers that explain the differences between the WACC of Disney and its comparables. Bloomberg L.P. WEIGHTED AVERAGE COST OF CAPITAL / BLOOMBERG BUSINESSWEEK CASE STUDY In the WACC Sensitivity tab on the accompanying spreadsheet, alter the cells as described below to see how changes to WACC's inputs impact the WACC. Write a few sentences describing each change. OFED RATE INCREASE An increase of the Federal Reserve interest rate by 200 basis points (2.0%) lifts the borrowing costs of every debt issuer. What is Disney's adjusted WACC? O CREDIT RATING CHANGE A downgrade in Disney's credit rating should increase its cost of debt to the same level as Six Flags, all other conditions being equal. What is Disney's adjusted WACC? O DEBT FOR ACQUISITION In 2018, Disney announced it would acquire Twenty-First Centry Fox assests for $71.3 billion. Assume Disney paid for the acqui- sition in cash by raising additional debt. What is Disney's adjusted WACC? OU.S. EQUITY MARKET DOWNTURN Equity market expectations may cool resulting in an expectation that equity markets may only expand by 200 basis points (2.0%) over the coming year. What is Disney's adjusted WACC? O INCREASED MARGINAL TAX RATE The tax rate cut has ended. A new administration is in power. Assume Disney's marginal tax rate rises to 30.0%. What is Disney's adjusted WACC? Bloomberg LP WEIGHTED AVERAGE COST OF CAPITAL / BLOOMBERG BUSINESSWEEK CASE STUDY 5 Terminal Tutorial Use the Bloomberg Terminal to answer case questions 1 & 2 Use these directions as a guide or watch the accompanying video tutorial. Web: https://vimeo.com/303712847/ce9e9e8ec8 Terminal: PLYR VOD 332919204 This is the summary WACC page for Disney. The first thing we need to do is time box the data. Under the Period dropdown menu that says MR, for Most Recent, select Q1 and make the year 2019. O Log in to the Bloomberg Terminal and type DIS, press the F8 equity sector key, type WACC into the command line, and then press GO DIS 7 03/01/2032 Corp SECF Related Functions Menu DIS Equity WACC FUNCTIONS KUP ARROW> to hide DIS Equity WACC Weighted Average Cost of Capital DIS Equity FA BS Financial Analysis: Standardized DIS Equity DDM Dividend Discount Model WACC DIS Equity EQRP Equity Risk Premium WACC Report Outp Weighted Average Cost of Period 21 20191 Capital Structure (Millions of USD) Cost 10,0% WxC 8.8% Market Cap ST Debt Debt 160,950.0 3,489.0 From this page we can fill in the capital structure elements of our case's WACC table, including the capital amounts for equity, preferred equity, and debt. Clicking on the Equity heading in the Cost of Capital table will bring up the terminal's WACC worksheet for Disney's equity. Disney WACC Elements Al Data as of First Quarter 2019 Metric Walt Disney Co/The Cost of Capital Value Beta Metric Equity Preferred Equity Short-Term Debt Long-Term Debt Total Capital Expected Return of the Market Risk Free Rate Tax Rate Pre-Tax Cost of Debt Value 161,265 o 6,009 3) Equity 4 DeD COST (A-1) 5) Preferred Equity WACC Weight 88.6% 11.48 0.0% Cost 10.0% 2.6-8 0.0% WX 8.8% 0.38 0.0% 9.1% 20,082 187,356 Notice there are equity elements that may not have been included in the textbook. That's okay. Let's go through this page to fill in the data in our table. Weighted Average cost of capital Incuts cost of Equity 13 Cost of Debt 13 Cost of Preferred fiquity Cost of Equity Risk Free Rate + Equity Risk Premium Beta X Country Premium Expected Market Return Risk Free Rate 9.95 2.72 7.24 0.90 8.05 10.16 2.72 The beta for Disney's stock is 0.90, the risk free rate is 2.72%, and the expected return of the market is 10.76%. This is all the data we need for equity in order to satisfy our simplified WACC formula. Disney WACC Elements All Data as of First Quarter 2019 Metric Value Metric Value Beta 0.90 Equity 161,265 Expected Return of the Market 10.76% Preferred Equity 0 0 Risk Free Rate 2.72% Short-Term Debt 6,009 Tax Rate Long-Term Debt 20,082 Pre-Tax Cost of Debt Total Capital 187,356 Market Capitalization 160950.00 WEIGHTED AVERAGE COST OF CAPITAL / BLOOMBERG BUSINESSWEEK CASE STUDY 6 Let's click on the Cost of Debt tab so we can fill in another cell of our table. Weighted average cout Capital Inputs 1 Cost of Equity cost of Debt Cost of Preferred Equity Cost of Debt 1 - Effective Tax Rate Effective Tax Rate x Total Pre-Tax Cost of Debt Note Rate x ST Debt to Total Debt ST Debt to Total Debt X Note Rate Bond Ratex LT Debt to Total Debt LT Debt to Total Debt Bond Rate x Debt Adjustment Factor 2.621 78.94 21.06 2.68 0.42 0.17 2.52 2.26 0.83 2.221 1.24 Disney's marginal tax rate is 21.06%. We need to find Disney's pre-tax cost of debt. It is listed on this table but the textbook uses the yield to maturity of the company's bonds, instead of the calculation methodology used by Bloomberg here. Disney WACC Elements Al Data as of First Quarter 2019 Metric Value Metric Value Beta 0.90 Equity 161,265 Expected Return of the Market 10.76% Preferred Equity 0 Risk Free Rate 2.72% Short-Term Debt 6,009 Tax Rate 21.06% Long-Term Debt 20,082 Pre-Tax Cost of Debt - Total Capital 187356 Total Debt Short Term Debt Long Term Debt 20665.00 3489.00 17176.00 In the command line, type DIS followed by the yellow F3 00 This is the Security Finder, or SECF, page for finding Corp key and press Enter or . securities on the terminal. The "DIS Corp" command filtered the SECF page to show a table of all of The Walt Disney Company's bonds. The R column signfies the most relevant bonds which we can use as a proxy for the most actively WALT DISNEY CO Equity SECF Related Functions traded of Disney's bonds. Select the series with the highest DIS Corp relevance indicator (DIS 7.00 03/01/2032). SECURITIES KUP ARROW> to hide DIS Corp TWDC Enterprises 18 Corp Corp Govt Loan Pfd CDS CDS Idx Muni DISH Corp DISH DBS Corp (Multiple Ma60) Excluded (147) Matured/Called, Non-Verified Bonds DIS 7 03/01/2032 Corp TWDC Enterprises 18 Corp RTicker Maturity Name Coupon DISCA Car Discovery Communications DIS D. DIS 03/01/2032 TWDC Enterprises 1. 7.000 DIS 067 157 2027 WDC Enterprises .... 2.950 DIS 07/30/2046 TWDC Enterprises 1.. 3.000 DIS 03/01/2037 Walt Disney Co/The 6.150 20 3) 00 From the popup menu, select YAS (Yield and Spread Analysis). Change both the date boxes to March 29, 2019, the last trading day of Q1, and press Enter. Next to the Yield field, change Wst to Mty for Yield to Maturity and press Enter. DIS 7 03/01/32 Corp Settings 0 This bond has a yield to maturity of 3.29%. Disney's WACC table is now complete and ready to be used to answer the first case question. Value Value 0.90 161.265 Disney WACC Elements AN Data as of First Quarter 2019 Metric Beta Expected Return of the Market Risk Free Rate Tax Rate Pre-Tax Cost of Debt 10.76% 0 D Yield & Spread 2) Graphs 3) Pricing 4 Descr DIS 7 03/01/32 ( 25468PBW5 ) Spread 92.41 bp vs 10yT 23 02/15/29 Price 138.7869 102.2656 Yield 3.290571 Mty 2.366492 S/A Wkout 03/01/2032 100.00 Yld 66 Settle 03/29/196 03/28/19 Trade 03/27/196 Retro (Using hist price) Metric Equity Preferred Equity Short-Term Debt Long-Term Debt Total Capital 2.72% 6,009 20,082 21.06% 3.29% 187356 Use the path described in the above Terminal tutorial, but instead of selecting Q1 at the start, select Q2. Bloomberg LP Bloomberg Businessweek The Year Ahead 2019 Global Economics Recessions D An early warning system for downturns may be giving off mixed signals 20 4% 3 Historically, the $15.4 trillion U.S. Treasury replacing them until October 2017, and that market has offered one of the most reliable process is ongoing. barometers for the health of the American econ- The Fed projects three possible rate hikes in omy. Investors are particularly fixated on what's 2019. That on its own could be enough to erase known as the yield curve, which depicts the much of the gap between short-term rates and yields on government debt of different matur- longer-term ones. And if the Fed steps up the pace ities at a given point in time. of hikes, could more easily see an inversion. The curve usually slopes upward as investors A pair of researchers at the Brookings typically demand higher returns for locking up Institution in Washington caution that inversion their money for a longer period. Occasionally, may not necessarily be the harbinger of a down- the curve flips, with yields on short-term debt turn this time. In an April web post, Michael Ng exceeding those on longer bonds. That's nor- and David Wessel wrote that the lingering effects mally a sign investors believe economic growth of the Fed's extraordinary bond-buying pro- will slow and interest rates will eventually fall. gram could be distorting the curve by weighing Research by the Federal Reserve Bank of San down on the term premium. That means "that Francisco has shown that an inversion has pre- ceded every U.S. recession for the past 60 years. U.S. Treasury Yield Curve The U.S. economy is 37 quarters into what . Nov. 13, 2010 Nov. 13, 2018 may prove to be its longest expansion on record. Analysts surveyed by Bloomberg expect gross domestic product growth to come in at 2.9 per- cent this year, up from 2.2 percent last year. Wages are rising as unfilled vacancies hover near all-time highs. With times this good, the biggest betting game on Wall Street is when they'll go bad. Barclays Plc, Goldman Sachs Group Inc., and other banks are predicting inversion will happen sometime in 2019. The conventional wisdom: Afterward 1-year 5-year 10-year it's only a matter of time-anywhere from 6 to 24 months-before a recession starts. But there are reasons to wonder whether the relatively small increases in short-term inter- curve's predictive powers remain intact. In the est rates relative to long-term rates could lead wake of the financial crisis, the Federal Reserve to inversion." not only slashed interest rates, it also bought tril- In an Oct. 29 note to clients, Scott Minerd, lions of dollars in long-term government bonds. global chief investment officer at Guggenheim At one point in 2017, the purchases pushed down Partners, said that argument is flawed. It fails to the term premium-the extra bonus investors recognize that factors such as regulatory changes, usually get to hold longer-term debt-on 10-year including those to money-market mutual funds, Treasury notes by a full percentage point, and an increase in Treasury issuance have acted according to one study. in the opposite direction, putting upward pres- While the Fed began raising short-term inter- sure on long-term rates. The yield curve, Minerd est rates in December 2015, it didn't start letting said, remains as reliable an indicator as ever. 6 the bonds on its balance sheet mature without -Liz Capo McCormick and Jeanna Smialek 2 1 0 30-year DATA COMPILED BY BLOOMBERG Weighted Average Cost of Capital Case Calculations WACC Cost of Capital Components Expected Return of Risk Free Market Rate Tax Rate Pre-Tax Debt Cost Bond Rating Capital Structure Components Short-Term Long-Term Equity Debt Debt Total Capital Beta Target Disney 0.96 9.6% 2.4% 21.8% 3.0% . 248,699 21,923 36,311 306,933 Parks and Resorts Six Flags Cedar Fair 0.89 0.77 9.6% 9.6% 2.4% 2.4% 24.2% 17.0% 4.2% 4.8% B+ B+ 4,190 2,699 19 8 2,467 2,150 6,676 4,857 Studio Entertainment Lions Gate 1.21 9.6% 2.4% 0.0% 4.3% B- 2,666 439 2,838 5,943 Broadcasting and Media Viacom Netflix 1.1 1.46 9.6% 9.6% 2.4% 2.4% 22.0% 17.7% 4.5% 2.6% BBB- BB- 12,059 160,826 320 138 8,638 13,541 21,017 174,505 Consumer Products ULTA 0.86 Sally Beauty 0.81 Game Stop 0.92 Source: Bloomberg All Data Effective 31 July 2019 9.6% 9.6% 9.6% 2.4% 2.4% 2.4% 22.7% 25.7% 23.5% 2.5% 6.9% 5.9% BB BB- 20,034 1,603 918 211 21 250 1,654 1,560 1,022 21,899 3,184 2,190 The BLOOMBERG TERMINAL service and Bloomberg data products (the "Services") are owned and distributed by Bloomberg Finance L.P. ("BFLP) except that Bloomberg L.P. and its subsidiaries ("BLP") distribute these products in Argentina, Australia and certain jurisdictions in the Pacific islands, Bermuda, China, India, Japan, Korea and New Zealand. BLP provides BFLP with global marketing and operational support. The following are trademarks and service marks of BFLP, a Delaware limited partnership, or its subsidiaries: BLOOMBERG, BLOOMBERG ANYWHERE, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG PROFESSIONAL, BLOOMBERG TERMINAL and BLOOMBERG.COM. Absence of any trademark or service mark from this list does not waive Bloomberg's intellectual property rights in that name, mark or logo. All rights reserved. Q2 Steps 2 and 3 bba bloomberg. net WALT DISNEY CO Equity | WACC - Related Functions Meria Message *0. ? Warning: Rough Approximation for WACC DIS US Equity D Create Report Walt Disney Co/The Cost of Capital 2) Dutput to Excel Weighted Average Cost of Capital Period Q2 - 2019 Capital Structure (Millions of USD) 3) Equity 4) Debt Cost (A-T) 5) Preferred Equity WACC Weight 77.6% 22.4% 0.0% Cost 8.7% 2.4% 0.0% W x C 6.8% 0.5% 0.0% 7.3% Market Cap ST Debt LT Debt Pref. Eqty Total 197,744.4 19,158.0 37,803.0 0.0 254,705.4 77.6% 7.5% 14.8% 0.0% 100.0% 6) History - WACC EVA ROIC EVA Spread 11.001 + Track 2 Annotate 9. Zoom WACC 7.236 10.50 10.00 Economic Value Added (Millions of USD) 7) Net Operating Profit 8) Cash Operating Taxes NOPAT 13737.00 3016.70 10720.30 9.50 9.00 9) Total Investment Capital Capital Charge 162403.00 11881.05 8.50 8.00 Economic Value Added - 1160.75 7.50 2.230 6.50 2011 2012 2013 2014 2015 2016 2019 2020 ROIC 6.60% 2017 2018 EVA Spread -0.71% 300) Edit Panel 301) Expand Panel 587 BNA 14:49 Singapore Gazettes Law Amending GST Act 586 BNA 14:49 Singapore Gazettes Rules Providing Income Tax Exemption Criteria f 585 CBC 14:49 First-degree murder charges laid in fatal K.I. fire that killed 5 584 NS1 14:49 The Fly: Adobe options imply 7.7% move in share price post-earning Suggested Functions GP Chart securities & technical studies VWAP Assess VWAP for multiple asset classes 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 11. x) Books - Excel Q2 Steps 5 and 6 bba.bloomberg. net WALT DISNEY CO Equity WACC - Related Functions Meria Message Capital 13) Cost of Preferred Equity to Close DIS US Weighted Average Cost of Capital Inputs Walt Disn Cost of a 11) Cost of Equity 12) Cost of Debt Cost of Equity Risk Free Rate 3) Equity Equity Risk Premium 4) Debt Beta 5) Prefe Country Premium WACC Expected Market Return Risk Free Rate 8.74 % 2.41 % 6.34 % 0.88 7.24 % 9.64 % 2.41 % 77.6% 7.5% 14.8% 0.0% 100.0% Market Capitalization 197744.43 6) History WACC 11.001 WAC 7.22 13737.00 3016.70 L0720.30 10.50- 10.0 9.50 0.00 $2403.00 L1881.05 8.00 1160.75 6.50- DUpdate 2) Reset Close 6.60% -0.71% 300) Edit Panel 301) Expand Panel 629 FTI 14:51 UK sets sights on tax raid on Uber, Airbnb and TaskRabbit 628 BBC 14:51 BBC: Championship Table - 9th December 2020 at 19:48 627 DJ 14:51 Bunge Canada: Closing Canola Prices - Dec 9 626 BLG 14:51 TechCrunch: Gift Guide: The best books for 2020 as recommended by Suggested Functions CN Read the latest news on a company ERN Compare estimated vs. reported earnings 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 1. x] Booki - Excel Q2 Steps 7 and 8 bba.bloomberg. net WALT DISNEY CO Equity WACC - Related Functions Merid Message *0? Capital kBack> to Close DIS US Weighted Average Cost of Capital Inputs Walt Disn Cost of a 11) Cost of Equity 12) Cost of Debt 13) Cost of Preferred Equity Cost of Debt 1 - Effective Tax Rate 3) Equity Effective Tax Rate 4) Debt X Total Pre-Tax Cost of Debt 5) Prefe Note Rate x ST Debt to Total Debt WACC ST Debt to Total Debt X Note Rate Bond Rate x LT Debt to Total Debt 6) History LT Debt to Total Debt D WACC x Bond Rate Debt Adjustment Factor 2.37 % 78.17 % 21.83 % 2.36 % 0.76 % 0.34 2.26 % 1.60 % 0.66 2.41 % 1.29 77.6% 7.5% 14.8% 0.0% 100.0% 11.00 30.50 WACC 7.234 13737.00 3016.70 LO720.30 10.00 - 9.50 Total Debt Short Term Debt Long Term Debt 56961.00 19158.00 37803.00 9.00- 52403.00 11881.05 + 8.50 8.00 - - 1160.75 722363 6.50 2011 D) Update 2) Reset Close 6.60% 0.71% 300) Edit Panel 301) Expand Panel 642 NS1 14:52 ESPN: NFL league office ahead of teams in diversity hiring, study 641 NS1 14:52 The Hill: State AGS, FTC sue Facebook, alleging anti-competitive pl 640 TWT 14:52 Bloomberg Quicktake: Players from Paris Saint-Germain (PSG) and IS 639 SYH 14:52 "South Africa have a fair bit of work to do': Australia anxious ab Suggested Functions CN Read the latest news on a company ERN Compare estimated vs. reported earnings 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 11- Booki - Excel Q2 Steps 11 and 12 DIS 7 03/01/2032 Corp YAS - Related Functions Menu Message ? Yield and Spread Analysis 95) Buy 96) Sell DIS 7 03/01/32 Corp Settings - No Notes 1) Yield & Spread 2) Graphs 3) Pricing 4) Description 5) Custom DIS 7 03/01/32 ( 25468PBW5 ) Risk Spread 84.54 bp VS 10yT 2 3 05/15/29 Price 143.3138 102.9141 O M.Dur Dur Yield 2.893058 Mty 2.047680 S/A Risk Wkout 03/01/2032 @ 100.00 Yld 66 Convexity Settle 06/28/190 06/27/198 DV-01 on 1MM Trade 06/26/196 Retro (Using hist price) Benchmark Risk Risk Hedge Proceeds Hedge Spreads Yield Calculations Invoice 11 G-Sprd 77.2 Street Convention 2.893058 Face 12 I-Sprd 82.6 Equiv 1 /Yr 2.913982 Principal 13) Basis -49.7 Mmkt (Act/360- Accrued (117 Days) 14) Z-Sprd 86.0 True Yield 2.892764 Total (USD) 15) ASW 104.2 Current Yield 4.884 16) OAS 80.2 Maturity 9.066 13.199 1.045 1,320 9.052 1,458 M 1,411M OAS 9.122 13.281 1.056 1,328 9.112 1,457M 1,000 M 1,433,138.00 22,750.00 1,455,888.00 After Tax (Inc 40.80C % CG 23.80C %) 1.204196 Issue Price = 99.170. Bond Purchased with Premi... 300) Edit Panel 301) Expand Panel 839 NS1 15:02 Fox Business: Facebook survey shows 15% of small businesses collap 838 BFW 15:02 PRICED: Ascot Group Limited $400m 10NC5 at Par to Yield 4.25% DJ 15:02 * Stratasys: Origin Deal for $60 Million at closing, $40 Million in BN 15:02 *JNJ CUTTING SIZE OF VACCINE TRIAL FROM 60,000 TO 40,000: STAT Suggested Functions GP Chart securities & technical studies HS Analyze a spread chart with statistics 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 1. x] Booki - Excel Q1 Steps 2 and 3 bba bloomberg. net WALT DISNEY CO Equity WACC - Related Functions Mera Message 0 ? DIS US $ 1 154.255 +0.535 Z154.23/154.28Z 2x2 13 At 14:11 d Vol 6,895,465 0 156.29P H 157.46Z L 154.15K Val 1.075B DIS US Equity 1) Create Report 2 Output to EXC Weighted Average cost of Capital Walt Disney Co/The Period Q1 2019 Cost of Capital Capital Structure (Millions of USD) 3) Equity 4) Debt Cost (A-T) 5) Preferred Equity WACC Weight 88.6% 11.4% 0.0% Cost 10.0% 2.6% 0.0% WXC 8.8% 0.3% 0.0% 9.1% Market Cap ST Debt LT Debt Pref. Eqty Total 160,950.0 3,489.0 17,176.0 0.0 181,615.0 88.6% 1.9% 9.5% 0.0% 100.0% 6) History - WACC EVA ROIC EVA Spread 11.001 Track Annotate Zoom WACC 7.236 10.50- 10.00 Economic Value Added (Millions of USD) 7) Net Operating Profit 8) Cash Operating Taxes NOPAT 14396.00 3045.90 11350.10 9.50 9.00 9) Total Investment Capital Capital Charge 76182.00 6947.20 8.50 8.00 - 6.50 2011 2012 2013 2014 2015 2016 2019 2020 Economic Value Added 4402.90 7.50 7.230 ROIC 14.90% 2017 2018 EVA Spread 5.78% 300) Edit Panel 301) Expand Panel 780 BT 14:26 PayPal Presentation Goldman Sachs U.s. Financial Services 779 FII 14:26 Fitch Ratings: Sector Outlook Stable for FBT, Consumer and Resta DJ 14:26 *Greenwich LifeSciences Inc. (GLSI) Paused due to volatility 778 BMP 14:26 Moody's announces completion of a periodic review of ratings of Zh Suggested Functions EIS Search for & request exchange products SMNR Find market-specific seminars & events 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 16- xBooki - Excel Q1 Steps 5 and 6 bba bloomberg.net WALT DISNEY CO Equity - WACC - Related Functions Meria Message * ? Capital 13) Cost of Preferred Equity to Close DIS US Weighted Average Cost of Capital Inputs Walt Disi Cost of a 11) Cost of Equity 12) Cost of Debt Cost of Equity Risk Free Rate 3) Equity Equity Risk Premium 4) Debt Beta 5) Prefe X Country Premium WACC Expected Market Return Risk Free Rate 9.95 % 2.72 % 7.24 % 0.90 8.05 % 10.76 % 2.72 % 88.6% 1.9% 9.5% 0.0% 100.0% Market Capitalization 160950.00 6) History WACC 11.001 WACC 7.236 10.50 10.00 14396.00 3045.90 11350.10 116182.00 6947.20 4402.90 2011 1 Update 2) Reset Close 14.90% 5.78% 300) Edit Panel 301) Expand Panel 789 NS1 14:26 Citybiz: Eric Schadt Founder & CEO of Sema4 Named 2020 BioCT Entre 788 NYT 14:26 Your Thursday Briefing 787 BT 14:26 Signify Meeting Capital Markets Day Teleconference LIGHT NA 786 BN 14:26 Nesco Holdings 122,494 Share Block Trades at $6.15 Suggested Functions EIS Search for & request exchange products SMNR Find market-specific seminars & events 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 1 x] Booki - Excel Q1 Steps 7 and 8 0 bba.bloomberg. net WALT DISNEY CO Equity WACC - Related Functions Med Message *0? Capital to Close DIS US Weighted Average cost of Capital Inputs Walt Disi Cost of a 11) Cost of Equity 12) Cost of Debt 13) Cost of Preferred Equity Cost of Debt 1 - Effective Tax Rate 3) Equity Effective Tax Rate 4) Debt x Total Pre-Tax Cost of Debt 5) Prefe Note Rate x ST Debt to Total Debt WACC ST Debt to Total Debt X Note Rate Bond Rate x LT Debt to Total Debt 6) History LT Debt to Total Debt WACC Bond Rate X Debt Adjustment Factor 2.62 % 78.94 % 21.06 % 2.68 % 0.42 % 0.17 2.52 % 2.26 % 0.83 2.72 % 1.24 88.6% 1.9% 9.5% 0.0% 100.0% WACC 7.230 14396.00 3045.90 11350.10 10,503 10.00 - 9.50 Total Debt Short Term Debt Long Term Debt 20665.00 3489.00 17176.00 0.00 16182.00 6947.20 8.50 8.00 4402.90 D) Update 2) Reset Close 14.90% 5.78% 300) Edit Panel 301) Expand Panel 806 NS1 14:27 Citybiz: Catalyst Funds Appoints Robert Armstrong as Managing Dire 805 ABC 14:27 ABC News: UN-African Union envoy says mistrust deep in Sudan's Dar 804 NYT 14:27 In a reversal, California says playgrounds can stay open despite s 803 FTI 14:27 Northern Ireland business groups uneasy over Brexit border plan Suggested Functions EIS Search for & request exchange products SMNR Find market-specific seminars & events 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 1- xBooki - Excel Q1 Steps 11 and 12 O bba bloomberg.net 0 0 0 DIS 7 03/01/2032 Corp YAS Related Functions Menu Message ? Yield and Spread Analysis 95) Buy 96) Sell Risk DIS 7 03/01/32 Corp Settings No Notes 1) Yield & Spread 2) Graphs 3) Pricing 4) Description 5) Custom DIS 7 03/01/32 ( 25468PBW5 ) Risk Spread 89.27 bp Vs 10yT 253 02/15/29 Price 139.1685 102-08 O M.Dur Dur Yield 3.260919 Mty - 2.368248 S/A Wkout 03/01/2032 @ 100.00 Yld 66 Convexity Settle 03/29/190 03/28/198 DV-01 on 1MM Trade 03/27/190 Retro (Using hist price) Benchmark Risk Risk Hedge Proceeds Hedge Spreads Yield Calculations Invoice 11 G-Sprd 82.5 Street Convention 3.260919 Face 12 I-Sprd 83.8 Equiv 1 /Yr 3.287503 Principal 13) Basis -47.9 Mmkt (Act/360 ) Accrued (28 Days) 14) Z-Sprd 86.1 True Yield 3.260591 Total (USD) 15) ASW 103.0 Current Yield 5.030 16) OAS 85.0 Maturity 9.227 12.892 1.077 1,289 8.880 1,452M 1,362M OAS 9.277 12.960 1.086 1,296 8.927 1,452M 1,000 M 1,391,685.00 5,444.44 1,397,129.44 After Tax (Inc40.80C % CG23.80C %) 1.463973 Issue Price = 99.170. Bond Purchased at Par. 300) Edit Panel 301) Expand Panel DJ 14:39 *FTC: Injunction Could Require Facebook to Seek Prior Notice and A 356 SPC 14:39 X-S&PGRBulletin: FTAI Rtgs Same On Prpsd $400M Unsecd Nts Add-On 355 CBC 14:39 4 outbreaks at Waterloo region schools, 1 closed as precaution BN 14:39 *HOLLAND AMERICA CRUISE TO OFFER FREE, REDUCED FARES IN 2021-22 Suggested Functions TDH See a bond's historical trading activity GC Monitor real-time & historical curves 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 1 x I Booki - Excel Bloomberg CASEO Businessweek STUDIES 4 Weighted Average Cost of Capital Analyze how the theoretical concepts This lesson explores how several companies and industries are of weighted average cost of capital capital (WACC) formula. To apply WACC learning to real work impacted by changing variables in the weighted average cost of (WACC) connect to the real world by complexities, we will examine how Boeing is impacted by inter- exploring the impact of changing WACC est rates in class and then apply the same lessons to Disney for homework. variables on a company. WEIGHTED AVERAGE COST OF CAPITAL / BLOOMBERG BUSINESSWEEK CASE STUDY Case Study Notes ments G. ratings, and WACCs. Companies within the same sector typically share similar capital RISK FREE RATE structures and costs of capital. For example, most power utili- The risk free rate is the U.S. government bond. A U.S. bond's ties are engaged in fundamentally the same business; genera- yield is considered risk free because the U.S. has not and is not tion, transmitting, and distributing electric power. The utility expected to default. business is highly dependent upon expensive fixed-asset invest- .e., power plants) which are often financed with debt. TAX RATE Consequently, analysts expect companies within the same sec- The company's tax rate impacts the after tax cost of debt but tor or industry to have similar betas, capital structures, bond has no bearing on either the cost of preferred equity or com- mon equity. The higher a company's tax rate the lower the after Disney is a diversified entertainment company. Its diversi- tax cost of debt. Consequently, as a source of capital, debt is a fication exists because its revenues come from four different, tax shield. but related, business segments-parks and resorts, studio enter- tainment, broadcasting and media, and consumer products. PRE-TAX COST OF DEBT Since there is no other enterprise quite like Disney, we exam- The pre-tax cost of debt can be determined by calculating the ine the WACCs of companies that operate within one or more yield to maturity on the company's bonds. A bond's yield to of its segments. maturity can be influenced by many factors including inflation, Beta credit quality, macroeconomic fundamentals, and how the com- The beta of a stock is a representation of how the stock moves pany's bonds are structured. with the broader equity market. Disney has a beta of 0.96 which implies that when the broad equity market goes up or down by one percent, Disney's stock will rise or fall by 0.96 percent. Low beta stocks, between 0.5 and 0.8, tend to be defensive. They do not rise much when the market rises, but they also do not fall significantly when the market falls. Disney's beta indi- cates a closer relationship to the market than any of its peers used in this case. Betas of Companies Comparable to Disney Segments All Data as of July 31 2019 146 1.60 1.40 1.21 1.20 1.10 0.96 0.89 0.86 0.92 0.77 0.81 1.00 0.80 0.60 0.40 0.20 0.00 Disney Cedar Fair Lion's Gate Viacom Net Six Flags Sally Beauty GameStop EXPECTED RETURN OF THE MARKET The expected return of the market is a fairly general observa- tion. In reality, no one knows by what degree the stock mar- ket will rise or fall over the next year. Nevertheless, in order to assess an individual stock we must have a view on where the broader market is heading. The expected return of the market is the same for every stock. Bloomberg L.P. WEIGHTED AVERAGE COST OF CAPITAL / BLOOMBERG BUSINESSWEEK CASE STUDY Case Questions Use the Terminal Tutorial to calculate Disney's weighted average cost of capital (WACC) for Q1 2019. Bloomberg includes more elements in the WACC calculation than the textbook does. For our purposes, use the textbook formula with the data points from Bloomberg. Use the Bloomberg Terminal to gather the necessary data to make a similar calculation for Q2 2019. * Using the Case Study Notes and the accompanying spreadsheet, calculate the WACC of each Disney segment comparable. Describe the primary WACC drivers that explain the differences between the WACC of Disney and its comparables. Bloomberg L.P. WEIGHTED AVERAGE COST OF CAPITAL / BLOOMBERG BUSINESSWEEK CASE STUDY In the WACC Sensitivity tab on the accompanying spreadsheet, alter the cells as described below to see how changes to WACC's inputs impact the WACC. Write a few sentences describing each change. OFED RATE INCREASE An increase of the Federal Reserve interest rate by 200 basis points (2.0%) lifts the borrowing costs of every debt issuer. What is Disney's adjusted WACC? O CREDIT RATING CHANGE A downgrade in Disney's credit rating should increase its cost of debt to the same level as Six Flags, all other conditions being equal. What is Disney's adjusted WACC? O DEBT FOR ACQUISITION In 2018, Disney announced it would acquire Twenty-First Centry Fox assests for $71.3 billion. Assume Disney paid for the acqui- sition in cash by raising additional debt. What is Disney's adjusted WACC? OU.S. EQUITY MARKET DOWNTURN Equity market expectations may cool resulting in an expectation that equity markets may only expand by 200 basis points (2.0%) over the coming year. What is Disney's adjusted WACC? O INCREASED MARGINAL TAX RATE The tax rate cut has ended. A new administration is in power. Assume Disney's marginal tax rate rises to 30.0%. What is Disney's adjusted WACC? Bloomberg LP WEIGHTED AVERAGE COST OF CAPITAL / BLOOMBERG BUSINESSWEEK CASE STUDY 5 Terminal Tutorial Use the Bloomberg Terminal to answer case questions 1 & 2 Use these directions as a guide or watch the accompanying video tutorial. Web: https://vimeo.com/303712847/ce9e9e8ec8 Terminal: PLYR VOD 332919204 This is the summary WACC page for Disney. The first thing we need to do is time box the data. Under the Period dropdown menu that says MR, for Most Recent, select Q1 and make the year 2019. O Log in to the Bloomberg Terminal and type DIS, press the F8 equity sector key, type WACC into the command line, and then press GO DIS 7 03/01/2032 Corp SECF Related Functions Menu DIS Equity WACC FUNCTIONS KUP ARROW> to hide DIS Equity WACC Weighted Average Cost of Capital DIS Equity FA BS Financial Analysis: Standardized DIS Equity DDM Dividend Discount Model WACC DIS Equity EQRP Equity Risk Premium WACC Report Outp Weighted Average Cost of Period 21 20191 Capital Structure (Millions of USD) Cost 10,0% WxC 8.8% Market Cap ST Debt Debt 160,950.0 3,489.0 From this page we can fill in the capital structure elements of our case's WACC table, including the capital amounts for equity, preferred equity, and debt. Clicking on the Equity heading in the Cost of Capital table will bring up the terminal's WACC worksheet for Disney's equity. Disney WACC Elements Al Data as of First Quarter 2019 Metric Walt Disney Co/The Cost of Capital Value Beta Metric Equity Preferred Equity Short-Term Debt Long-Term Debt Total Capital Expected Return of the Market Risk Free Rate Tax Rate Pre-Tax Cost of Debt Value 161,265 o 6,009 3) Equity 4 DeD COST (A-1) 5) Preferred Equity WACC Weight 88.6% 11.48 0.0% Cost 10.0% 2.6-8 0.0% WX 8.8% 0.38 0.0% 9.1% 20,082 187,356 Notice there are equity elements that may not have been included in the textbook. That's okay. Let's go through this page to fill in the data in our table. Weighted Average cost of capital Incuts cost of Equity 13 Cost of Debt 13 Cost of Preferred fiquity Cost of Equity Risk Free Rate + Equity Risk Premium Beta X Country Premium Expected Market Return Risk Free Rate 9.95 2.72 7.24 0.90 8.05 10.16 2.72 The beta for Disney's stock is 0.90, the risk free rate is 2.72%, and the expected return of the market is 10.76%. This is all the data we need for equity in order to satisfy our simplified WACC formula. Disney WACC Elements All Data as of First Quarter 2019 Metric Value Metric Value Beta 0.90 Equity 161,265 Expected Return of the Market 10.76% Preferred Equity 0 0 Risk Free Rate 2.72% Short-Term Debt 6,009 Tax Rate Long-Term Debt 20,082 Pre-Tax Cost of Debt Total Capital 187,356 Market Capitalization 160950.00 WEIGHTED AVERAGE COST OF CAPITAL / BLOOMBERG BUSINESSWEEK CASE STUDY 6 Let's click on the Cost of Debt tab so we can fill in another cell of our table. Weighted average cout Capital Inputs 1 Cost of Equity cost of Debt Cost of Preferred Equity Cost of Debt 1 - Effective Tax Rate Effective Tax Rate x Total Pre-Tax Cost of Debt Note Rate x ST Debt to Total Debt ST Debt to Total Debt X Note Rate Bond Ratex LT Debt to Total Debt LT Debt to Total Debt Bond Rate x Debt Adjustment Factor 2.621 78.94 21.06 2.68 0.42 0.17 2.52 2.26 0.83 2.221 1.24 Disney's marginal tax rate is 21.06%. We need to find Disney's pre-tax cost of debt. It is listed on this table but the textbook uses the yield to maturity of the company's bonds, instead of the calculation methodology used by Bloomberg here. Disney WACC Elements Al Data as of First Quarter 2019 Metric Value Metric Value Beta 0.90 Equity 161,265 Expected Return of the Market 10.76% Preferred Equity 0 Risk Free Rate 2.72% Short-Term Debt 6,009 Tax Rate 21.06% Long-Term Debt 20,082 Pre-Tax Cost of Debt - Total Capital 187356 Total Debt Short Term Debt Long Term Debt 20665.00 3489.00 17176.00 In the command line, type DIS followed by the yellow F3 00 This is the Security Finder, or SECF, page for finding Corp key and press Enter or . securities on the terminal. The "DIS Corp" command filtered the SECF page to show a table of all of The Walt Disney Company's bonds. The R column signfies the most relevant bonds which we can use as a proxy for the most actively WALT DISNEY CO Equity SECF Related Functions traded of Disney's bonds. Select the series with the highest DIS Corp relevance indicator (DIS 7.00 03/01/2032). SECURITIES KUP ARROW> to hide DIS Corp TWDC Enterprises 18 Corp Corp Govt Loan Pfd CDS CDS Idx Muni DISH Corp DISH DBS Corp (Multiple Ma60) Excluded (147) Matured/Called, Non-Verified Bonds DIS 7 03/01/2032 Corp TWDC Enterprises 18 Corp RTicker Maturity Name Coupon DISCA Car Discovery Communications DIS D. DIS 03/01/2032 TWDC Enterprises 1. 7.000 DIS 067 157 2027 WDC Enterprises .... 2.950 DIS 07/30/2046 TWDC Enterprises 1.. 3.000 DIS 03/01/2037 Walt Disney Co/The 6.150 20 3) 00 From the popup menu, select YAS (Yield and Spread Analysis). Change both the date boxes to March 29, 2019, the last trading day of Q1, and press Enter. Next to the Yield field, change Wst to Mty for Yield to Maturity and press Enter. DIS 7 03/01/32 Corp Settings 0 This bond has a yield to maturity of 3.29%. Disney's WACC table is now complete and ready to be used to answer the first case question. Value Value 0.90 161.265 Disney WACC Elements AN Data as of First Quarter 2019 Metric Beta Expected Return of the Market Risk Free Rate Tax Rate Pre-Tax Cost of Debt 10.76% 0 D Yield & Spread 2) Graphs 3) Pricing 4 Descr DIS 7 03/01/32 ( 25468PBW5 ) Spread 92.41 bp vs 10yT 23 02/15/29 Price 138.7869 102.2656 Yield 3.290571 Mty 2.366492 S/A Wkout 03/01/2032 100.00 Yld 66 Settle 03/29/196 03/28/19 Trade 03/27/196 Retro (Using hist price) Metric Equity Preferred Equity Short-Term Debt Long-Term Debt Total Capital 2.72% 6,009 20,082 21.06% 3.29% 187356 Use the path described in the above Terminal tutorial, but instead of selecting Q1 at the start, select Q2. Bloomberg LP Bloomberg Businessweek The Year Ahead 2019 Global Economics Recessions D An early warning system for downturns may be giving off mixed signals 20 4% 3 Historically, the $15.4 trillion U.S. Treasury replacing them until October 2017, and that market has offered one of the most reliable process is ongoing. barometers for the health of the American econ- The Fed projects three possible rate hikes in omy. Investors are particularly fixated on what's 2019. That on its own could be enough to erase known as the yield curve, which depicts the much of the gap between short-term rates and yields on government debt of different matur- longer-term ones. And if the Fed steps up the pace ities at a given point in time. of hikes, could more easily see an inversion. The curve usually slopes upward as investors A pair of researchers at the Brookings typically demand higher returns for locking up Institution in Washington caution that inversion their money for a longer period. Occasionally, may not necessarily be the harbinger of a down- the curve flips, with yields on short-term debt turn this time. In an April web post, Michael Ng exceeding those on longer bonds. That's nor- and David Wessel wrote that the lingering effects mally a sign investors believe economic growth of the Fed's extraordinary bond-buying pro- will slow and interest rates will eventually fall. gram could be distorting the curve by weighing Research by the Federal Reserve Bank of San down on the term premium. That means "that Francisco has shown that an inversion has pre- ceded every U.S. recession for the past 60 years. U.S. Treasury Yield Curve The U.S. economy is 37 quarters into what . Nov. 13, 2010 Nov. 13, 2018 may prove to be its longest expansion on record. Analysts surveyed by Bloomberg expect gross domestic product growth to come in at 2.9 per- cent this year, up from 2.2 percent last year. Wages are rising as unfilled vacancies hover near all-time highs. With times this good, the biggest betting game on Wall Street is when they'll go bad. Barclays Plc, Goldman Sachs Group Inc., and other banks are predicting inversion will happen sometime in 2019. The conventional wisdom: Afterward 1-year 5-year 10-year it's only a matter of time-anywhere from 6 to 24 months-before a recession starts. But there are reasons to wonder whether the relatively small increases in short-term inter- curve's predictive powers remain intact. In the est rates relative to long-term rates could lead wake of the financial crisis, the Federal Reserve to inversion." not only slashed interest rates, it also bought tril- In an Oct. 29 note to clients, Scott Minerd, lions of dollars in long-term government bonds. global chief investment officer at Guggenheim At one point in 2017, the purchases pushed down Partners, said that argument is flawed. It fails to the term premium-the extra bonus investors recognize that factors such as regulatory changes, usually get to hold longer-term debt-on 10-year including those to money-market mutual funds, Treasury notes by a full percentage point, and an increase in Treasury issuance have acted according to one study. in the opposite direction, putting upward pres- While the Fed began raising short-term inter- sure on long-term rates. The yield curve, Minerd est rates in December 2015, it didn't start letting said, remains as reliable an indicator as ever. 6 the bonds on its balance sheet mature without -Liz Capo McCormick and Jeanna Smialek 2 1 0 30-year DATA COMPILED BY BLOOMBERG Weighted Average Cost of Capital Case Calculations WACC Cost of Capital Components Expected Return of Risk Free Market Rate Tax Rate Pre-Tax Debt Cost Bond Rating Capital Structure Components Short-Term Long-Term Equity Debt Debt Total Capital Beta Target Disney 0.96 9.6% 2.4% 21.8% 3.0% . 248,699 21,923 36,311 306,933 Parks and Resorts Six Flags Cedar Fair 0.89 0.77 9.6% 9.6% 2.4% 2.4% 24.2% 17.0% 4.2% 4.8% B+ B+ 4,190 2,699 19 8 2,467 2,150 6,676 4,857 Studio Entertainment Lions Gate 1.21 9.6% 2.4% 0.0% 4.3% B- 2,666 439 2,838 5,943 Broadcasting and Media Viacom Netflix 1.1 1.46 9.6% 9.6% 2.4% 2.4% 22.0% 17.7% 4.5% 2.6% BBB- BB- 12,059 160,826 320 138 8,638 13,541 21,017 174,505 Consumer Products ULTA 0.86 Sally Beauty 0.81 Game Stop 0.92 Source: Bloomberg All Data Effective 31 July 2019 9.6% 9.6% 9.6% 2.4% 2.4% 2.4% 22.7% 25.7% 23.5% 2.5% 6.9% 5.9% BB BB- 20,034 1,603 918 211 21 250 1,654 1,560 1,022 21,899 3,184 2,190 The BLOOMBERG TERMINAL service and Bloomberg data products (the "Services") are owned and distributed by Bloomberg Finance L.P. ("BFLP) except that Bloomberg L.P. and its subsidiaries ("BLP") distribute these products in Argentina, Australia and certain jurisdictions in the Pacific islands, Bermuda, China, India, Japan, Korea and New Zealand. BLP provides BFLP with global marketing and operational support. The following are trademarks and service marks of BFLP, a Delaware limited partnership, or its subsidiaries: BLOOMBERG, BLOOMBERG ANYWHERE, BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG PROFESSIONAL, BLOOMBERG TERMINAL and BLOOMBERG.COM. Absence of any trademark or service mark from this list does not waive Bloomberg's intellectual property rights in that name, mark or logo. All rights reserved. Q2 Steps 2 and 3 bba bloomberg. net WALT DISNEY CO Equity | WACC - Related Functions Meria Message *0. ? Warning: Rough Approximation for WACC DIS US Equity D Create Report Walt Disney Co/The Cost of Capital 2) Dutput to Excel Weighted Average Cost of Capital Period Q2 - 2019 Capital Structure (Millions of USD) 3) Equity 4) Debt Cost (A-T) 5) Preferred Equity WACC Weight 77.6% 22.4% 0.0% Cost 8.7% 2.4% 0.0% W x C 6.8% 0.5% 0.0% 7.3% Market Cap ST Debt LT Debt Pref. Eqty Total 197,744.4 19,158.0 37,803.0 0.0 254,705.4 77.6% 7.5% 14.8% 0.0% 100.0% 6) History - WACC EVA ROIC EVA Spread 11.001 + Track 2 Annotate 9. Zoom WACC 7.236 10.50 10.00 Economic Value Added (Millions of USD) 7) Net Operating Profit 8) Cash Operating Taxes NOPAT 13737.00 3016.70 10720.30 9.50 9.00 9) Total Investment Capital Capital Charge 162403.00 11881.05 8.50 8.00 Economic Value Added - 1160.75 7.50 2.230 6.50 2011 2012 2013 2014 2015 2016 2019 2020 ROIC 6.60% 2017 2018 EVA Spread -0.71% 300) Edit Panel 301) Expand Panel 587 BNA 14:49 Singapore Gazettes Law Amending GST Act 586 BNA 14:49 Singapore Gazettes Rules Providing Income Tax Exemption Criteria f 585 CBC 14:49 First-degree murder charges laid in fatal K.I. fire that killed 5 584 NS1 14:49 The Fly: Adobe options imply 7.7% move in share price post-earning Suggested Functions GP Chart securities & technical studies VWAP Assess VWAP for multiple asset classes 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 11. x) Books - Excel Q2 Steps 5 and 6 bba.bloomberg. net WALT DISNEY CO Equity WACC - Related Functions Meria Message Capital 13) Cost of Preferred Equity to Close DIS US Weighted Average Cost of Capital Inputs Walt Disn Cost of a 11) Cost of Equity 12) Cost of Debt Cost of Equity Risk Free Rate 3) Equity Equity Risk Premium 4) Debt Beta 5) Prefe Country Premium WACC Expected Market Return Risk Free Rate 8.74 % 2.41 % 6.34 % 0.88 7.24 % 9.64 % 2.41 % 77.6% 7.5% 14.8% 0.0% 100.0% Market Capitalization 197744.43 6) History WACC 11.001 WAC 7.22 13737.00 3016.70 L0720.30 10.50- 10.0 9.50 0.00 $2403.00 L1881.05 8.00 1160.75 6.50- DUpdate 2) Reset Close 6.60% -0.71% 300) Edit Panel 301) Expand Panel 629 FTI 14:51 UK sets sights on tax raid on Uber, Airbnb and TaskRabbit 628 BBC 14:51 BBC: Championship Table - 9th December 2020 at 19:48 627 DJ 14:51 Bunge Canada: Closing Canola Prices - Dec 9 626 BLG 14:51 TechCrunch: Gift Guide: The best books for 2020 as recommended by Suggested Functions CN Read the latest news on a company ERN Compare estimated vs. reported earnings 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 1. x] Booki - Excel Q2 Steps 7 and 8 bba.bloomberg. net WALT DISNEY CO Equity WACC - Related Functions Merid Message *0? Capital kBack> to Close DIS US Weighted Average Cost of Capital Inputs Walt Disn Cost of a 11) Cost of Equity 12) Cost of Debt 13) Cost of Preferred Equity Cost of Debt 1 - Effective Tax Rate 3) Equity Effective Tax Rate 4) Debt X Total Pre-Tax Cost of Debt 5) Prefe Note Rate x ST Debt to Total Debt WACC ST Debt to Total Debt X Note Rate Bond Rate x LT Debt to Total Debt 6) History LT Debt to Total Debt D WACC x Bond Rate Debt Adjustment Factor 2.37 % 78.17 % 21.83 % 2.36 % 0.76 % 0.34 2.26 % 1.60 % 0.66 2.41 % 1.29 77.6% 7.5% 14.8% 0.0% 100.0% 11.00 30.50 WACC 7.234 13737.00 3016.70 LO720.30 10.00 - 9.50 Total Debt Short Term Debt Long Term Debt 56961.00 19158.00 37803.00 9.00- 52403.00 11881.05 + 8.50 8.00 - - 1160.75 722363 6.50 2011 D) Update 2) Reset Close 6.60% 0.71% 300) Edit Panel 301) Expand Panel 642 NS1 14:52 ESPN: NFL league office ahead of teams in diversity hiring, study 641 NS1 14:52 The Hill: State AGS, FTC sue Facebook, alleging anti-competitive pl 640 TWT 14:52 Bloomberg Quicktake: Players from Paris Saint-Germain (PSG) and IS 639 SYH 14:52 "South Africa have a fair bit of work to do': Australia anxious ab Suggested Functions CN Read the latest news on a company ERN Compare estimated vs. reported earnings 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 11- Booki - Excel Q2 Steps 11 and 12 DIS 7 03/01/2032 Corp YAS - Related Functions Menu Message ? Yield and Spread Analysis 95) Buy 96) Sell DIS 7 03/01/32 Corp Settings - No Notes 1) Yield & Spread 2) Graphs 3) Pricing 4) Description 5) Custom DIS 7 03/01/32 ( 25468PBW5 ) Risk Spread 84.54 bp VS 10yT 2 3 05/15/29 Price 143.3138 102.9141 O M.Dur Dur Yield 2.893058 Mty 2.047680 S/A Risk Wkout 03/01/2032 @ 100.00 Yld 66 Convexity Settle 06/28/190 06/27/198 DV-01 on 1MM Trade 06/26/196 Retro (Using hist price) Benchmark Risk Risk Hedge Proceeds Hedge Spreads Yield Calculations Invoice 11 G-Sprd 77.2 Street Convention 2.893058 Face 12 I-Sprd 82.6 Equiv 1 /Yr 2.913982 Principal 13) Basis -49.7 Mmkt (Act/360- Accrued (117 Days) 14) Z-Sprd 86.0 True Yield 2.892764 Total (USD) 15) ASW 104.2 Current Yield 4.884 16) OAS 80.2 Maturity 9.066 13.199 1.045 1,320 9.052 1,458 M 1,411M OAS 9.122 13.281 1.056 1,328 9.112 1,457M 1,000 M 1,433,138.00 22,750.00 1,455,888.00 After Tax (Inc 40.80C % CG 23.80C %) 1.204196 Issue Price = 99.170. Bond Purchased with Premi... 300) Edit Panel 301) Expand Panel 839 NS1 15:02 Fox Business: Facebook survey shows 15% of small businesses collap 838 BFW 15:02 PRICED: Ascot Group Limited $400m 10NC5 at Par to Yield 4.25% DJ 15:02 * Stratasys: Origin Deal for $60 Million at closing, $40 Million in BN 15:02 *JNJ CUTTING SIZE OF VACCINE TRIAL FROM 60,000 TO 40,000: STAT Suggested Functions GP Chart securities & technical studies HS Analyze a spread chart with statistics 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 1. x] Booki - Excel Q1 Steps 2 and 3 bba bloomberg. net WALT DISNEY CO Equity WACC - Related Functions Mera Message 0 ? DIS US $ 1 154.255 +0.535 Z154.23/154.28Z 2x2 13 At 14:11 d Vol 6,895,465 0 156.29P H 157.46Z L 154.15K Val 1.075B DIS US Equity 1) Create Report 2 Output to EXC Weighted Average cost of Capital Walt Disney Co/The Period Q1 2019 Cost of Capital Capital Structure (Millions of USD) 3) Equity 4) Debt Cost (A-T) 5) Preferred Equity WACC Weight 88.6% 11.4% 0.0% Cost 10.0% 2.6% 0.0% WXC 8.8% 0.3% 0.0% 9.1% Market Cap ST Debt LT Debt Pref. Eqty Total 160,950.0 3,489.0 17,176.0 0.0 181,615.0 88.6% 1.9% 9.5% 0.0% 100.0% 6) History - WACC EVA ROIC EVA Spread 11.001 Track Annotate Zoom WACC 7.236 10.50- 10.00 Economic Value Added (Millions of USD) 7) Net Operating Profit 8) Cash Operating Taxes NOPAT 14396.00 3045.90 11350.10 9.50 9.00 9) Total Investment Capital Capital Charge 76182.00 6947.20 8.50 8.00 - 6.50 2011 2012 2013 2014 2015 2016 2019 2020 Economic Value Added 4402.90 7.50 7.230 ROIC 14.90% 2017 2018 EVA Spread 5.78% 300) Edit Panel 301) Expand Panel 780 BT 14:26 PayPal Presentation Goldman Sachs U.s. Financial Services 779 FII 14:26 Fitch Ratings: Sector Outlook Stable for FBT, Consumer and Resta DJ 14:26 *Greenwich LifeSciences Inc. (GLSI) Paused due to volatility 778 BMP 14:26 Moody's announces completion of a periodic review of ratings of Zh Suggested Functions EIS Search for & request exchange products SMNR Find market-specific seminars & events 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 16- xBooki - Excel Q1 Steps 5 and 6 bba bloomberg.net WALT DISNEY CO Equity - WACC - Related Functions Meria Message * ? Capital 13) Cost of Preferred Equity to Close DIS US Weighted Average Cost of Capital Inputs Walt Disi Cost of a 11) Cost of Equity 12) Cost of Debt Cost of Equity Risk Free Rate 3) Equity Equity Risk Premium 4) Debt Beta 5) Prefe X Country Premium WACC Expected Market Return Risk Free Rate 9.95 % 2.72 % 7.24 % 0.90 8.05 % 10.76 % 2.72 % 88.6% 1.9% 9.5% 0.0% 100.0% Market Capitalization 160950.00 6) History WACC 11.001 WACC 7.236 10.50 10.00 14396.00 3045.90 11350.10 116182.00 6947.20 4402.90 2011 1 Update 2) Reset Close 14.90% 5.78% 300) Edit Panel 301) Expand Panel 789 NS1 14:26 Citybiz: Eric Schadt Founder & CEO of Sema4 Named 2020 BioCT Entre 788 NYT 14:26 Your Thursday Briefing 787 BT 14:26 Signify Meeting Capital Markets Day Teleconference LIGHT NA 786 BN 14:26 Nesco Holdings 122,494 Share Block Trades at $6.15 Suggested Functions EIS Search for & request exchange products SMNR Find market-specific seminars & events 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 1 x] Booki - Excel Q1 Steps 7 and 8 0 bba.bloomberg. net WALT DISNEY CO Equity WACC - Related Functions Med Message *0? Capital to Close DIS US Weighted Average cost of Capital Inputs Walt Disi Cost of a 11) Cost of Equity 12) Cost of Debt 13) Cost of Preferred Equity Cost of Debt 1 - Effective Tax Rate 3) Equity Effective Tax Rate 4) Debt x Total Pre-Tax Cost of Debt 5) Prefe Note Rate x ST Debt to Total Debt WACC ST Debt to Total Debt X Note Rate Bond Rate x LT Debt to Total Debt 6) History LT Debt to Total Debt WACC Bond Rate X Debt Adjustment Factor 2.62 % 78.94 % 21.06 % 2.68 % 0.42 % 0.17 2.52 % 2.26 % 0.83 2.72 % 1.24 88.6% 1.9% 9.5% 0.0% 100.0% WACC 7.230 14396.00 3045.90 11350.10 10,503 10.00 - 9.50 Total Debt Short Term Debt Long Term Debt 20665.00 3489.00 17176.00 0.00 16182.00 6947.20 8.50 8.00 4402.90 D) Update 2) Reset Close 14.90% 5.78% 300) Edit Panel 301) Expand Panel 806 NS1 14:27 Citybiz: Catalyst Funds Appoints Robert Armstrong as Managing Dire 805 ABC 14:27 ABC News: UN-African Union envoy says mistrust deep in Sudan's Dar 804 NYT 14:27 In a reversal, California says playgrounds can stay open despite s 803 FTI 14:27 Northern Ireland business groups uneasy over Brexit border plan Suggested Functions EIS Search for & request exchange products SMNR Find market-specific seminars & events 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 1- xBooki - Excel Q1 Steps 11 and 12 O bba bloomberg.net 0 0 0 DIS 7 03/01/2032 Corp YAS Related Functions Menu Message ? Yield and Spread Analysis 95) Buy 96) Sell Risk DIS 7 03/01/32 Corp Settings No Notes 1) Yield & Spread 2) Graphs 3) Pricing 4) Description 5) Custom DIS 7 03/01/32 ( 25468PBW5 ) Risk Spread 89.27 bp Vs 10yT 253 02/15/29 Price 139.1685 102-08 O M.Dur Dur Yield 3.260919 Mty - 2.368248 S/A Wkout 03/01/2032 @ 100.00 Yld 66 Convexity Settle 03/29/190 03/28/198 DV-01 on 1MM Trade 03/27/190 Retro (Using hist price) Benchmark Risk Risk Hedge Proceeds Hedge Spreads Yield Calculations Invoice 11 G-Sprd 82.5 Street Convention 3.260919 Face 12 I-Sprd 83.8 Equiv 1 /Yr 3.287503 Principal 13) Basis -47.9 Mmkt (Act/360 ) Accrued (28 Days) 14) Z-Sprd 86.1 True Yield 3.260591 Total (USD) 15) ASW 103.0 Current Yield 5.030 16) OAS 85.0 Maturity 9.227 12.892 1.077 1,289 8.880 1,452M 1,362M OAS 9.277 12.960 1.086 1,296 8.927 1,452M 1,000 M 1,391,685.00 5,444.44 1,397,129.44 After Tax (Inc40.80C % CG23.80C %) 1.463973 Issue Price = 99.170. Bond Purchased at Par. 300) Edit Panel 301) Expand Panel DJ 14:39 *FTC: Injunction Could Require Facebook to Seek Prior Notice and A 356 SPC 14:39 X-S&PGRBulletin: FTAI Rtgs Same On Prpsd $400M Unsecd Nts Add-On 355 CBC 14:39 4 outbreaks at Waterloo region schools, 1 closed as precaution BN 14:39 *HOLLAND AMERICA CRUISE TO OFFER FREE, REDUCED FARES IN 2021-22 Suggested Functions TDH See a bond's historical trading activity GC Monitor real-time & historical curves 1-BLOOMBERG 2-BLOOMBERG 3-BLOOMBERG 4-BLOOMBERG LP Launchpad - View 1 x I Booki - Excel