For my assignment , I had to: Write a report that contains the following elements:

Your calculated WACC

How data was used to calculate WACC (provide the formula and the formula with your values substituted)

Sources for your data

A discussion of how much confidence you have in your answer, including what the limiting assumptions you made were, if any....

I completed that. I need help with the last question . Base on the information below, how much confidence would you be in my answer (WACC) including what the limiting assumptions you could have made were, if any?

WACC stand for the weighted average cost of capital, with its major components being cost of debt and cost of equity.

Let's start with the calculation of WACC for Apple Inc.

Risk free rate =10 year maturity bond = 3.5%

Default spread of Apple = 0.63% (Rated AA1 by Moody's)

Equity market risk premium = 5% = (Market return - risk free rate)

Tax rate = 40%

Beta = 1.31

Cost of debt = Risk free rate + default spread = 3.5% + 0.63% = 4.13%

After tax cost of debt = cost of debt * (1 - tax) = 4.13*(1 - .40) = 2.478%

Calculating after tax cost of debt at this point will, save us from calculating it at the point of WACC calculation, thus making our calculation simpler

Cost of equity = Risk free rate + beta*equity risk premium = 3.5% + 1.31*5% = 3.5% + 6.55% = 10.05%

Apple's debt (D)= 122.19 Billion.

Apple's market cap (E)= 2000Billion

D/(D+E) = 122.19/2122.19 = 0.0575

E/(D+E) = 2000/2122.19 = .9424

WACC = (after tax cost of debt * D/(D+E)) + ( cost of equity * E/(D+E))

= 2.478 * 0.0575 + 10.05 * 0.9424

= 0.1424 + 9.47112

=9.61%

Therefore WACC of Apple Inc is 9.61%

The above data like beta, debt, market cap, equity proportion etc have been from the yahoo finance and the financials of the company itself. Confidence bestowed upon the calculation is 100% with no scope of error and complete follow ups of formula and rules