Answered step by step
Verified Expert Solution
Question
1 Approved Answer
My company is Walmart and Target is their competitor. In a memo to the Chief Executive Officer, answer the following questions, which are pre-loaded in
My company is Walmart and Target is their competitor.
In a memo to the Chief Executive Officer, answer the following questions, which are pre-loaded in your Memo Template:
- The weighted average cost of capital (WACC) represents a firm's average cost of capital from all sources, including common stock, preferred stock, bonds, and other forms of debt. WACC is a common way to determine the required rate of return because it expresses, in a single number, the return that both bondholders and shareholders demand to provide the company with capital. A firms WACC is likely to be higher if its stock is relatively volatile or if its debt is seen as risky because investors will demand greater returns. Considering this information, what is the WACC of your chosen company and its closest competitor? Does one company appear more volatile than the other? How does the WACC translate to both companies stock performance?
- Leverage ratios measure the amount of capital that comes from debt. In other words, leverage financial ratios are used to evaluate a companys debt levels. The debt ratio measures the relative amount of a companys assets that are provided from debt. Considering this information and drawing from the information in your course material, find three debt/leverage ratios for your chosen company and its closest competitor. How does your chosen company compare to its closest competitor, as far as these ratios? What inference can you draw from the historical ratios and where they are now?
- Which of the two companies is the better run company?
Thank you.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started