Question
In week 5, you calculated the CAPM for your company of interest. This week, it's time to calculate the WACC for the same company.Do not
In week 5, you calculated the CAPM for your company of interest. This week, it's time to calculate the WACC for the same company.Do not simply copy the GurufocusWACC calculation and call it your own.You can find it for your company here by copying this link and substituting in the symbol for your company where you see ATGE:https://www.gurufocus.com/term/wacc/ATGE/WACCbut you will have to justify each number AND Gurufocusdoes not use preferred debt so you might need to add a third component.Remember that you likely found multiple different betas for that company.Carefully justify each number you use in the equation and identify its source.
- Part 1: No later than Wednesday, identify the capital structure weights you will use, for equity, debt, and preferred stock.Calculate these percentages based on the appropriate dollar figures you have identified for that company.Explain each of your choices, based on information from the company's documents and market capitalization.Some companies have a great deal of short term debt, so you may want to add a fourth category, depending on your company. Many companies don't have preferred shares but some do. Adjust accordingly.Be prepared to defend your choices.
- Part 2: , calculate the WACC using the weights identified in your first post as well as the appropriate costs for each type of funds.Be sure and justify the beta that you used in the CAPM for your cost of equity.Each number used must have a source and its choice must be explained.Remember to show your work.
- Part 3: do a little sensitivity analysis, either using Oracle Crystal Ball and some probability distributions of your choice, withreasonable values, or simply trying different values and comparing the results.Sensitivity analysis is testing the impact of your assumptions on the outcome of your model.Play with it, and tell us what you learned.
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