Heya, I could use some help on this. Let me know.

Background:

Managers are paid to make money for investors. In practice this means that the select project (make investments) that provide returns greater than the cost of money. How is the cost of money measured? This is accomplished by calculating the Weighted Average Cost of Capital (WACC).

Typically, firm have two main types of financing (investors). Debt holders provide debt financing. Equity holders provide equity financing. By understanding the cost of debt and the cost of equity, WACC can be calculated.

Cost of equity is typically calculated by first calculating the beta, then using the CAPM equation to find expected returns. Cost of debt can be calculated by calculating a weighted average of the YTM for the various bonds issued.

Your task:

You are required to calculate the WACC for CSX. For the cost of equity, you are asked to collect prices for the firms stock (as well as the market index, use S&P 500) from a website such aswww.finance.yahoo.com, calculate returns, and then find the beta by conducting regression analysis. Once you find the beta, you are asked to apply the CAPM by making appropriate assumptions (use data as much as possible) about the risk-free rate and the market risk premium. For the cost of debt, conduct research (http://quicktake.morningstar.com/StockNet/bonds.aspx?Symbol=CSX) and calculate a weighted average of the YTM to make your estimate. State and explain your assumptions.

Explain the estimation procedure.