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You have a corporate client (you pick a corporation for this assignment) who needs to better understand their cost of capital for their company.
You have a corporate client (you pick a corporation for this assignment) who needs to better understand their cost of capital for their company. You being the genius financial analyst you are, immediately think it would be helpful to calculate the Weighted Average Cost of Capital (WACC) for your client. You know that WACC is a firm's cost of capital where debt and equity (the two types of capital) are proportionately weighted based on their size. You tell your client this and show them the below formula and they immediately spit on the ground in disgust because they hate big formulas. Market Cap MarketCap+Debt WACC= Debt MarketCap+Debt Cost of Equity+ Cost of Debt (1-CorpTax Rate) Since your client hates looking at big formulas, you instead propose you build a simple python program to do all the math for them. They liked the idea and stressed the following criteria have to be met with this program: 1. The user can input their own Risk-Free Rate & Expected Market Return 2. The code needs to be easily readable in case they want to make changes 3. The result needs to be listed as a percentage Beyond those 3 criteria, you can take any liberties you want as long as the math works out. Disclaimer: This assignment will not walk you through how to take every step and obtain every variable. This is intentional. We have gone over these concepts in class and there are materials on blackboard to help as well. You are expected to employ a level of problem solving on your own for this assignment. This means if you find any errors when running your program, I expect you to use your materials and search the web to find an answer. Starting Point 1. First, open the DCF Formula Cheat Sheet pdf file attached to the assignment. a. This file breaks down the WACC formula and its contents on page 2 and it can essentially act as your guide to calculating WACC. 2. Next you will open a new file in atom and save it as WACC.py a. Remember the ".py" identifies your file as a python file which is essential to run your program. Steps in Python Once you have your new WACC.py file open, you are ready to start coding. You will need to do the following: 1. Define each variable for your WACC (Market Cap, Cost of Equity, Debt, etc) 2. Utilize the input() function to allow the user to input both the Risk-Free Rate & Expected Market Return 3. Define WACC as a variable by recreating the WACC formula within python (using the variables you just defined). 4. Using the print() function in python, print your WACC a. Make sure you print WACC as a percentage. Hint: there is no percentage datatype in python so the most logical way to do this would be multiplying your WACC by 100, turn it into a string datatype, and add a "%" to that string.
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