Computer_lab_3

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

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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

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Balance Sheet (millions) Current Assets 100 Current Liabilities 20 Fixed Assets 200 Long-term Debt 150 0.38 Equity 130 Total Assets
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## 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.

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

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