Disney WACC Elements All Data as of Q2 2019 Metric Value Metric Value Beta 0.88 Equity 197,744 Expected Return of the 9.64% Preferred Equity 0 Market Risk Free Rate 2.41% Short-Term Debt 19,158 Tax Rate 21.83% Long-Term Debt 37,803 Pre-Tax Cost of Debt 2.99% Total Capital 254,705Case Questions 1 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. 3 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 LP.O 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. FED RATE INCREASE Disney's adjusted WACC? An increase of the Federal Reserve interest rate by 200 basis points (2 09%) lifts the borrowing costs of every debt issuer. What is 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? O U.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.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/ce9ege8ec8 Terminal: PLYR VOD 332919204 O Log In to the Bloomberg Terminal and type DIS, press the This is the summary WACC page for Disney. The first FB equity sector key, type WACC Into the command line, and thing we need to do is time box the data. Under the Period then press GO. dropdown menu that says MR, for Most Recent, select Q1 and 015 7 03/01/2032 Corp . SECF - Related Functions Mark W make the year 2019. DIS Equity HACC : Report Weighted Average Cost of FUNCTIONS Period 01 2019 DIS Equity HACC Weighted Average Cost of Capital Capital Structure (Millions of USD) DIS Equity FA 65 Financial Analysis: Standardized DIS Equity DOH Dividend Discount Model WACK Cost W XC Market Cap 160.950.0 DIS Equity Eqrp Equity Risk Premium WACK 10.0% B.BL SI Debt 3,489.0 From this page we can fill in the capital structure elements Q Clicking on the Equity heading in the Cost of Capital table of our case's WACC table, including the capital amounts for will bring up the terminal's WACC worksheet for Disney's equity, preferred equity, and debt. equity. Disney WACO Elements Walt Disney Co/The All Data as of First Quarter Borg Cost of Capital Metric Value Metric Data Equity 61.205 Weight Cost Expected Return of the Market Preferred Equity 1) Equity 88.64 10.0% 8.8% Risk From Folk Short-Term Daba + Debt COST [A-1) 2.56 0.3'S 3,009 0.04 0.0% Tax Rate Long-term Debt 20.002 " Preferred Equity 0.0% WACO 9.12 Pre-Tax Cost of Debt Total Capital @ Notice there are equity elements that may not have been The beta for Disney's stock Is 0.90, the risk free rate is Included in the textbook. That's okay. Let's go through this 2.72%, and the expected return of the market is 10.76%. page to fill in the data in our table. This is all the data we need for equity in order to satisfy our simplified WACC formula. Toast al Debt |13 Cost of Preferred Exerty 9.95 Disney WACC Elements Cost of Equity Risk Free Rate AN Dere as of First Quarter 2019 Equity Risk Premium Metric Value Metric Country Premium 0.90 Equity 181,265 Expected Market Return Risk Free Rate Expected Ratum of the Market 1076 Preferred Equity Market Capitalization 14095060 Risk Free Rate 272% Short-Term Debt 6009 Tax Rate Long-Term Debt 20042 Pre-Tax Cost of Debt Total Capita 187358 Bloomberg LP