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. -- SE An What 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 acq sition in cash by raising additional debt. What is Disney's adjusted WACC? Scenario Changes WACC Cost of Capital Components Expected Return Risk Free Pre-Tax of Market Rate Tax Rate Debt Cost Bond Rating Capital Structure Components Short-Term Long-Term Total Equity Debt Capital Beta Debt Target Disney Six Flags 0.96 0.89 9.6% 9.6% 2.4% 2.4% 21.8% 24.2% 3.0% 4.2% A B+ 248,699 4,190 21.923 19 36,311 2,467 306,933 6,676 7.9% 6.3% Fed Rate Move Disney Six Flags 248,699 0.96 0.89 9.6% 9.6% 2.4% 2.4% 21.8% 24.2% 3.0% 4.2% . B+ 21,923 19 36,311 2,467 306,933 6,676 7.9% 6.3% 4,190 Credit Rating Change Disney 0.96 Six Flags 0.89 248,699 9.6% 9.6% 2.4% 2.4% 21.8% 24.2% 3.0% 4.2% . B+ 21,923 19 36,311 2,467 306,933 6,676 7.9% 6.3% 4,190 Additional Debt for Fox Acquisition Disney 0.96 9.6% 0.89 9.6% 248,699 2.4% 2.4% 21.8% 24.2% 3.0% 4.2% . B+ 21,923 19 36,311 2,467 Six Flags 306,933 6,676 7.9% 6.3% 4,190 Bear Stock Market Disney 0.96 Six Flags 0.89 9.6% 9.6% 2.4% 2.4% 21.8% 24.2% 3.0% 4.2% A B+ 248,699 4,190 21,923 19 36,311 2,467 306,933 6,676 7.9% 6.3% Tax Rate Increases Disney 0.96 Six Flags 0.89 9.6% 7.9% 2.4% 2.4% 21.8% 24.2% 3.0% 4.2% A B+ 248,699 4,190 21,923 19 36,311 2,467 306,933 6,676 9.6% 6.3% WAAC ELEMENTS OF DISNEY Q2 2019 ALL DATA Metric Beta Expected Return of the Market Risk Free Rate Tax Rate Pre-Tax Cost of Debt Value 0.88 9.64% 2.41% 21.83% 2.99% Metric Equity Preferred Equity Short-Term Debt Long-Term Debt Total Capital Value 197,744 0 19,158 37,803 254,705 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. -- SE An What 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 acq sition in cash by raising additional debt. What is Disney's adjusted WACC? Scenario Changes WACC Cost of Capital Components Expected Return Risk Free Pre-Tax of Market Rate Tax Rate Debt Cost Bond Rating Capital Structure Components Short-Term Long-Term Total Equity Debt Capital Beta Debt Target Disney Six Flags 0.96 0.89 9.6% 9.6% 2.4% 2.4% 21.8% 24.2% 3.0% 4.2% A B+ 248,699 4,190 21.923 19 36,311 2,467 306,933 6,676 7.9% 6.3% Fed Rate Move Disney Six Flags 248,699 0.96 0.89 9.6% 9.6% 2.4% 2.4% 21.8% 24.2% 3.0% 4.2% . B+ 21,923 19 36,311 2,467 306,933 6,676 7.9% 6.3% 4,190 Credit Rating Change Disney 0.96 Six Flags 0.89 248,699 9.6% 9.6% 2.4% 2.4% 21.8% 24.2% 3.0% 4.2% . B+ 21,923 19 36,311 2,467 306,933 6,676 7.9% 6.3% 4,190 Additional Debt for Fox Acquisition Disney 0.96 9.6% 0.89 9.6% 248,699 2.4% 2.4% 21.8% 24.2% 3.0% 4.2% . B+ 21,923 19 36,311 2,467 Six Flags 306,933 6,676 7.9% 6.3% 4,190 Bear Stock Market Disney 0.96 Six Flags 0.89 9.6% 9.6% 2.4% 2.4% 21.8% 24.2% 3.0% 4.2% A B+ 248,699 4,190 21,923 19 36,311 2,467 306,933 6,676 7.9% 6.3% Tax Rate Increases Disney 0.96 Six Flags 0.89 9.6% 7.9% 2.4% 2.4% 21.8% 24.2% 3.0% 4.2% A B+ 248,699 4,190 21,923 19 36,311 2,467 306,933 6,676 9.6% 6.3% WAAC ELEMENTS OF DISNEY Q2 2019 ALL DATA Metric Beta Expected Return of the Market Risk Free Rate Tax Rate Pre-Tax Cost of Debt Value 0.88 9.64% 2.41% 21.83% 2.99% Metric Equity Preferred Equity Short-Term Debt Long-Term Debt Total Capital Value 197,744 0 19,158 37,803 254,705
