Computer_lab_3

Computer_lab_3 - Calculating WACC Problem: Everything Corp....

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Calculating WACC 1. Unlever Beta Comparable D/(D+E) NOTES: Franklin Toaster 0.86 0.33 0.58 Ohio Toaster 1.15 0.59 0.47 Superior Toasters 0.79 0.38 0.49 0.51 2. Relever Beta Target D/(D+E) 0.60 1.28 3. Cost of Equity 5.45% 10-year treasury rate Rp 6.90% market risk premium 14.31% 4. Cost of Debt Bond rating AA estimated from comparable data Premium 1.00% premium over treasurys 6.45% 5. WACC t 44% from last year's operating results WACC 7.9% Problem: Everything Corp. has operations in many different businesses, including the manufacturing of toasters. Find the WACC appropriate for discounting the cash flows associated with an expansion in its toaster manufacturing business. Levered β E Unlevered β A β A E *(E/(D+E)) AVERAGE β A Relevered β E β E A /(E/(D+E)) r f K E K E =r f +β(Rp) K D WACC=(D/(D+E))K D (1-t) + (E/(D+E))K E
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Balance Sheet (millions) Current Assets 100 Current Liabilities 20 Fixed Assets 200 Long-term Debt 150 0.38 Equity 130 Total Assets
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/17/2011 for the course BUS M 401 taught by Professor Toddmitton during the Fall '10 term at BYU.

Page1 / 9

Computer_lab_3 - Calculating WACC Problem: Everything Corp....

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online