Company Norfolk Southern

1. Determine the firms rd from the 10-K report in the Note to the Long-term Debt, where rd = (wdi*rdi), where wdi = the weight of debt for each bond and rdi is the coupon rate for each bond. Please regard equation 6.6 on page 247 for a review of the methodology.

2. Construct the capital structure of the firm to find the wd and we components of the WACC. Note that the dollar amount of long-term debt and the dollar amount of total equity should be utilized. Preferred equity dollar amount should be included in the calculation if the firm still has preferred equity outstanding.

3. Find the firms beta.

4. Determine the firms tax rate from the 10-K information. Please make sure to include the page number where you determined the firms tax rate in the 10-K report from the previous fiscal year.

5. Find either the 1-year Treasury bill rate or the 10-year Treasury note rate at the close of the firms fiscal year. If the risk-free rate is provided by the firm in the 10-K, please utilize this percentage. Full credit will not be earned if the 4% rfr in the givens in the instructions is utilized.

6. Find an appropriate rm percentage for the previous fiscal year. Full credit will not be earned if the 8% rpm given in the instructions is utilized.

7. Construct the current CAPM rs for the firm. Please review page 258, equation 6.14.

8. Construct the current WACC for the firm. Please review page 375, equation 9.2. Note that you do not have to utilize the short-term debt portion in the equation.

9. Calculate the beta unlevered. Please review page 611, equation 15-10.

10. Calculate the new beta levered at plus or minus 5% or 10% intervals of wd in the firms capital structure. Please review page 611, equation 15.9a.

11. Determine the new rs CAPMs at each differing capital structure utilizing the new levered betas.

12. Make sure to adjust the rd by plus or minus the percentage of wds change, so that a leverage increase of 5% should result in a new rd of (rd*1.05) and a leverage decrease of 5% should result in a new rd of (rd*0.95). Please refer to page 610 figure 15-5.

Please review the week-10 announcement that includes information on problems 15-9, 15-10, and 15-11 on pages 622 and 623.

13. Replicate rows 1 to 6 in figure 15-5 on page 610 to determine the capital structure where WACC is minimized.

14. Graph the WACCs at the different capital structures of the firm as stated in the instructions. Note that the WACC graph should be in a "U" shape.

15. Calculate the FCF utilizing Figure 2-5 on page 65. Please show the calculations for steps 1 to 5.

16. Using a zero-growth valuation model of V^0 = FCF/WACC, determine the V^0 at the optimal capital structure.

17. Determine the estimated stock price per share utilizing Figure 7-6 on page 309.

18. Review that stock price of the firm at the close of fiscal 2015. Compare the market price to the calculated intrinsic price, and make a recommendation on the stock. Support your recommendation with a stock chart and analysts information.

BSA 554 WACC Project Check-list: Please show all calculations and write a paragraph on what you have learned in completing each step of the project. 1. Determine the firm's rd from the 10-K report in the Note to the Long-term Debt, where rd = (wdi*rdi), where w step of the project. re rd = (wdi*rdi), where wdi = the weight of debt for each bond and rdi is the coupon rate for each bond. Please regard equatio bond. Please regard equation 6.6 on page 247 for a review of the methodology. 2. Construct the capital structure of the firm to find the wd and we components of the WACC. Note that the dol Please show all calculations and write a paragraph on what you have learned in completing each step of the project. ACC. Note that the dollar amount of long-term debt and the dollar amount of total equity should be utilized. Preferred equit step of the project. utilized. Preferred equity dollar amount should be included in the calculation if the firm still has preferred equity outstanding. rred equity outstanding. 3. Find the firm's beta. Please show all calculations and write a paragraph on what you have learned in completing each step of the project. step of the project. 4. Determine the firm's tax rate from the 10-K information. Please make sure to include the page number where Please show all calculations and write a paragraph on what you have learned in completing each step of the project. the page number where you determined the firm's tax rate in the 10-K report from the previous fiscal year. step of the project. 5. Find either the 1-year Treasury bill rate or the 10-year Treasury note rate at the close of the firm's fiscal year. Please show all calculations and write a paragraph on what you have learned in completing each step of the project. f the firm's fiscal year. If the risk-free rate is provided by the firm in the 10-K, please utilize this percentage. Full credit will step of the project. entage. Full credit will not be earned if the 4% rfr in the givens in the instructions is utilized. 6. Find an appropriate rm percentage for the previous fiscal year. Full credit will not be earned if the 8% rpm gi Please show all calculations and write a paragraph on what you have learned in completing each step of the project. earned if the 8% rpm given in the instructions is utilized. step of the project. 7. Construct the current CAPM rs for the firm. Please review page 258, equation 6.14. Please show all calculations and write a paragraph on what you have learned in completing each step of the project. step of the project. 8. Construct the current WACC for the firm. Please review page 375, equation 9.2. Note that you do not have t Please show all calculations and write a paragraph on what you have learned in completing each step of the project. e that you do not have to utilize the short-term debt portion in the equation. step of the project. 9. Calculate the beta unlevered. Please review page 611, equation 15-10. Please show all calculations and write a paragraph on what you have learned in completing each step of the project. step of the project. 10. Calculate the new beta levered at plus or minus 5% or 10% intervals of wd in the firm's capital structure. Ple Please show all calculations and write a paragraph on what you have learned in completing each step of the project. 's capital structure. Please review page 611, equation 15.9a. step of the project. 11. Determine the new rs CAPMs at each differing capital structure utilizing the new levered betas. Please show all calculations and write a paragraph on what you have learned in completing each step of the project. step of the project. 12. Make sure to adjust the rd by plus or minus the percentage of wd's change, so that a leverage increase of 5% s Please review the week-10 announcement that includes information on problems 15-9, 15-10, and 15-11 on pages Please show all calculations and write a paragraph on what you have learned in completing each step of the project. everage increase of 5% should result in a new rd of (rd*1.05) and a leverage decrease of 5% should result in a new rd of (rd*0 -10, and 15-11 on pages 622 and 623. step of the project. sult in a new rd of (rd*0.95). Please refer to page 610 figure 15-5. 13. Replicate rows 1 to 6 in figure 15-5 on page 610 to determine the capital structure where WACC is minimized Please show all calculations and write a paragraph on what you have learned in completing each step of the project. ere WACC is minimized. step of the project. 14. Graph the WACCs at the different capital structures of the firm as stated in the instructions. Note that the WA Please show all calculations and write a paragraph on what you have learned in completing each step of the project. tions. Note that the WACC graph should be in a "U" shape. step of the project. 15. Calculate the FCF utilizing Figure 2-5 on page 65. Please show the calculations for steps 1 to 5. Please show all calculations and write a paragraph on what you have learned in completing each step of the project. step of the project. 16. Using a zero-growth valuation model of V^0 = FCF/WACC, determine the V^0 at the optimal capital structur Please show all calculations and write a paragraph on what you have learned in completing each step of the project. optimal capital structure. step of the project. 17. Determine the estimated stock price per share utilizing Figure 7-6 on page 309. Please show all calculations and write a paragraph on what you have learned in completing each step of the project. step of the project. 18. Review that stock price of the firm at the close of fiscal 2015. Compare the market price to the calculated int Please show all calculations and write a paragraph on what you have learned in completing each step of the project. The project is due by Sunday, February 26 th. No late work will be accepted. ice to the calculated intrinsic price, and make a recommendation on the stock. Support your recommendation with a stock c step of the project. mendation with a stock chart and analysts' information