Financial Analysis Exercise IV

Part A: Weighted Average Cost of Capital (WACC)

Go to http://thatswacc.com/[1] and enter the ticker symbol for the stock you selected and click on the tab entitled Calculate WACC.

Complete the following tables:

Name of Company/Stock	Johnson & Johnson
Ticker Symbol	JNJ

From the http://thatswacc.com/ results for your company:

WACC	2.76%
Cost of debt, iD	-1.50%
Corporate tax rate, TC	35.82%
Total debt, D	?
Total equity, E	?
Total firm value, V	?
Cost of equity, iE	4.78%

CAPM Components

Beta, ?
Historical market return, iM	Assumed 11%
Risk-free rate, iF	Assumed 3%

Using data in the table confirm the accuracy of the sites WACC calculation:

Weight of Equity
Weighted Average Cost of Equity
Weight of Debt
Pre-Tax Weighted Average Cost of Debt
After-Tax Weighted Cost of Debt
Weighted Average Cost of Capital