Question
Gather the data to estimate General Electric's (ticker symbol = GE) WACC using market value weights. In computing the cost of equity, use all three
Gather the data to estimate General Electric's (ticker symbol = GE) WACC using market value weights. In computing the cost of equity, use all three methods (Constant Growth Model, CAPM, and Bond-Yield-Plus-Risk-Premium).
Justify your choice of which method (or average of methods) is most appropriate to use in your estimate of WACC for GE. Prepare a brief report explaining and documenting all of your calculations. Please cite and attach all sources of information that are used in your calculations. Information Sources Needed: You can use any financial internet website to pull the relevant data needed.
Listed below are some examples.
a) finance.yahoo.com - needed for stock price, analyst's growth estimates, etc.
b) finance.yahoo.com/bonds for Treasury security yields (Risk-free rate)
c) Most recently issued GE Corporate Bond: i. 4.5% semi-annual coupon, matures March 2044, 12/31/2018 price quote=97.696 ($976.96)
Data to gather: Market value of equity (market cap), Market value of LT debt, Stock price, Recent or expected dividend, Dividend growth rate, beta, risk-free rate, market risk premium, tax rate
Calculations:
- rd= YTM
- rs calculation for each of the three methods and justification for final estimate
- Dividend growth rate (unless you can justify a specific growth rate)
- Weights of long-term debt and common equity (capital structure)
- WACC
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