Question
You work in Walt Disney Companys corporate finance and treasury department and have just been assigned to the team estimating Disneys WACC. You must estimate
You work in Walt Disney Companys corporate finance and treasury department and have just been assigned to the team estimating Disneys WACC. You must estimate this WACC in preparation for a team meeting later today. You quickly realize that the information you need is readily available online.
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Assuming that Disney has a tax rate of 20%, calculate its after-tax debt cost of capital.
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Calculate Disneys WACC.
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Calculate Disneys 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 Disneys WACC using the weights based on the net debt. How much does it change?
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How confident are you of your estimate? Which implicit assumptions did you make during your data collection efforts?
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