This is the day case I've been assigned for the week and I have no idea how to do it. Can anyone assist?

BUSI 570 Owner's Manual - Week 5. This chart provides an alternative to the 100+ bonds that Disney currently has outstanding These instructions are listed to align with the instructions in the data case. The bond issuance that matures in 2033 reflects an actual Disney bond issuance. Other than that, there is nothing special about this bond issuance. All other bonds are hypothetical 1. You can find the yield on a 10-year treasury bond on the site shown in the instructions or on All amounts are listed in thousands of dollars (000) www.treasury.gov. Market capitalization (or "market cap") is just the number of shares outstanding times the market price. You should not have to calculate this. You can get it from where the text says to find it, or you can just look Hope this helps. Let me know if you have questions. See the remainder of the steps below: at the top of the page when you open DIS in Yahoo (there is a line that says "market cap") Remember that corporate bonds are quoted as a percentage of $1,000. Therefore, if a bond is quoted at 101, that 3-5. Some good and bad news here. means the value is $1,010. If the bond is quoted at 98.5, that means the value is $985. If the total size of a bond issuance is (for example) $500M, then the market value of the issuance using the above prices will be $505M and $492.5M respectively. Through no fault of the textbook publishers (or the individuals who designed the course), a couple of things have changed since the text was published and the assignment was created: 5. The price for each bond issue in your spreadsheet is reported as a percentage of the bond's par value. For example, 104.50 means that the bond issue is trading at 104.5% of its par value. You can calculate the market Morningstar or Finra have made the bond table difficult to export, causing people to have to type in all the value of each bond issue by multiplying the amount outstanding by (Price/100) Do so for each issue and then data. calculate the total of all the bond issues. This is the market value of Disney's debt. The previous bullet was not that big a deal when Disney had 30 or so bonds. However, over the past several months, Disney has issued about 70 additional bonds. That information is reflected on Disney's most recent 6. Compute the weights for Disney's equity and debt based on the market value of equity and Disney's market balance sheet, where you can see that the face value of long-term debt has more than doubled to $38+/- value of debt, computed in Step 5. You are citing "market values" instead of "book values" for both debt and equity, billion. so you will not find the values you need on a balance sheet. The market value of equity is the "market cap", and the market value of debt is found in steps 3-5. So that you don't have to turn this assignment into a typing exercise dealing with over 100 bonds, I'm offering an 7. Calculate Disney's cost of equity capital using the CAPM, the risk-free rate you collected in Step 1, and a alternative below. Specifically: market risk premium of 5%. You are using the Capital Asset Pricing Model (CAPM) to calculate the cost of equity. This is simply: To find the market value of debt, instead of having to type in the 100+ actual bonds, you can use the information I offer below in the table. All of the bonds are hypothetical (with one exception), and this will (risk-free rate) + (beta*market premium). For example, if the risk-free rate is 2%, the beta is .8, and the market make this assignment far easier and less time intensive, while still driving home the learning objectives. premium is 5%, then the cost of equity is 2%+.8(5%) = 6%. Do not confuse market return with market You still have to use the instructions and search the actual 100+ bonds to find the bond that matures closest premium. to 10 years after today's date - and use that bond as a proxy for Disney's cost of debt. Assuming that Disney has a tax rate of 20%, calculate its after-tax debt cost of capital. Calculate Disney's WACC. Let's assume that Disney's after-tax cost of debt is 4%, its market value of debt is $30M, the cost of equity is 6% and the market cap. is $90M (these numbers are just used for illustrative purposes. The real capitalization numbers are much higher.) Using these inputs, the total capitalization is $120M, of which ssuer Callable Face Value Coupon Maturity Price Yield debt comprises 25% and equity comprises 75%. The calculation to figure WACC is: .25(4%) +.75(6%) = 5.5%. Disney No Corp. Bond $342,347 6.550% 3-15-2033 147.533 2.177% 10. Calculate Disney's net debt by subtracting its cash (collected in Step 2) from its debt. Recalculate the weights for the WACC using the market value of equity, net debt, and enterprise value. Recalculate Disney's WACC using the weights based on the net debt. How much does it change? Disney Corp. Bond |$17,000,000 5.00% 5-19-2041 106 4.35% 11. How confident are you of your estimate? Which implicit assumptions did you make during your data collection efforts? Disney No Corp. Bond $8,500,000 5.25% 8-27-2045 97.8 5.80% Disney No Corp. Bond |$12,000,000 4.75% 1-26-2053 103.5 4.63% Notes