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Using the Case Study Notes and the accompanying spreadsheet, calculate the WACC of each Disney segment comparable. Describe the primary WACC drivers that explain the
Using the Case Study Notes and the accompanying spreadsheet, calculate the WACC of each Disney segment comparable. Describe the primary WACC drivers that explain the differences between the WACC of Disney and its comparables.
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Cost of Capital Components Expected Return Risk Free of Market Rate Tax Rate Pre-Tax Debt Cost Bond Rating Capital Structure Components Short-Term Long-Term Equity Debt Debt Total Capital Beta Target Disney 0.96 9.6% 2.4% 21.8% 3.0% A 248,699 21,923 36,311 306,933 Parks and Resorts Six Flags Cedar Fair 0.89 B+ 19 9.6% 9.6% 2.4% 2.4% 24.2% 17.0% 4.2% 4.8% 4,190 2,699 2,467 2,150 6,676 4,857 0.77 B+ 8 Studio Entertainment Lions Gate 1.21 9.6% 2.4% 0.0% 4.3% B- 2,666 439 2,838 5,943 Broadcasting and Media Viacom 1.1 Netflix 1.46 9.6% 9.6% 2.4% 2.4% 22.0% 17.7% 4.5% 2.6% BBB- BB- 12,059 160,826 320 138 8,638 13,541 21,017 174,505 Consumer Products ULTA Sally Beauty Game Stop 0.86 0.81 0.92 9.6% 9.6% 9.6% 2.4% 2.4% 2.4% 22.7% 25.7% 23.5% 2.5% 6.9% 5.9% BB BB- 20,034 1,603 918 211 21 250 1,654 1,560 1,022 21,899 3,184 2,190 Cost of Capital Components Expected Return Risk Free of Market Rate Tax Rate Pre-Tax Debt Cost Bond Rating Capital Structure Components Short-Term Long-Term Equity Debt Debt Total Capital Beta Target Disney 0.96 9.6% 2.4% 21.8% 3.0% A 248,699 21,923 36,311 306,933 Parks and Resorts Six Flags Cedar Fair 0.89 B+ 19 9.6% 9.6% 2.4% 2.4% 24.2% 17.0% 4.2% 4.8% 4,190 2,699 2,467 2,150 6,676 4,857 0.77 B+ 8 Studio Entertainment Lions Gate 1.21 9.6% 2.4% 0.0% 4.3% B- 2,666 439 2,838 5,943 Broadcasting and Media Viacom 1.1 Netflix 1.46 9.6% 9.6% 2.4% 2.4% 22.0% 17.7% 4.5% 2.6% BBB- BB- 12,059 160,826 320 138 8,638 13,541 21,017 174,505 Consumer Products ULTA Sally Beauty Game Stop 0.86 0.81 0.92 9.6% 9.6% 9.6% 2.4% 2.4% 2.4% 22.7% 25.7% 23.5% 2.5% 6.9% 5.9% BB BB- 20,034 1,603 918 211 21 250 1,654 1,560 1,022 21,899 3,184 2,190Step by Step Solution
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