1 WACC Project: The Walt Disney Company Nathan M. Bisk College of Business, Florida Institute of Technology BUS 5440: Financial Management Dr. Mitchel Miller April 18, 2021

WACC Project: The Walt Disney Company2 Table of Contents Introduction/Background4 Data Analysis6 Cost of Equity6 Cost of Preferred Stock7 Cost of Debt7 Market Value of Debt8 Market Value of Equity8 Market Value of Preferred Stock8 Value of Firm8 Firm’s Tax Rate8 Weight for Equity8 Weight for Preferred Stock8 Weight for Debt8 Weighted Average Cost of Capital (WACC)8 Assumptions9 Conclusions10 Appendices12 Appendix A12 Appendix B12 Appendix C13 Appendix D16 Appendix E17 References18

3 Introduction/Background The Walt Disney Company was started in 1923 when Walt Disney signed a contract with M.J. Winkler to produce a series of animated/live-action shorts based on a little girl cartoon he created called Alice’s Wonderland. In 1928 Disney’s iconic character, Mickey Mouse, become a sensation with the production of Steamboat Willie. As of today, it is an international family entertainment and media enterprise with multiple subsidiaries and affiliates. The Walt Disney Company (n.d.) has enterprises in Disney Parks, Experiences and Products, as well as, Disney Media and Entertainment with content in movie studios, general entertainment, and sports that produce content directly to consumers, for theaters, and other linear platforms. Disney Parks, Experiences and Products include The Walt Disney World in Orlando, FL, Disney resorts in

4 Hawaii, Tokyo, and Shanghai, Disneyland in California, Paris, and Hong Kong, Disney Cruise Line, Disney Vacation Club, Adventure cruises by Disney, Disney Imagineering, and Disney Publishing Worldwide. Disney Media and Entertainment includes ESPN, ESPN +, Hulu, hotstar, ABC entertainment and news, Disney Branded Television, National Geographic, Freeform, FX, Pixar Studios, Walt Disney Studios, Blue Sky Studios, Lucasfilms, Marvel Studios, Disney Music & Theatrical Groups, Searchlight pictures, and 20th Century Studios. Disney had 155.991 million visitors to its parks globally in 2019 (Smith, 2020). By August 2020 it was estimated that Disney park attendance was down 80% (Soberman, 2020). Per The Walt Disney Company (2020), Disney had revenue of $65,388 million in 2020 and $69,607 million in 2019 - a negative 6% change. They had total costs and expenses of $61,594 million in 2020 and $57,777 million in 2019 - a negative 7% change. They paid $699 million on taxes in 2020 and $3,026 million on taxes in 2019 - a 77% change for the better, this equated to an effective tax rate of negative 40.1% in 2020 and 21.7% in 2019. They had a net income loss of $2,864 million in 2020 and a net income of $11,054 million in 2019 - a negative 126% difference. They had 1,808 million outstanding common shares of stock in 2020 versus 1,656 million in 2019. Disney stock was trading at $187.59 per share (Yahoo Finance, 2021b) and they had 1,80,485,037 outstanding shares of common stock as of November 2020 (The Walt Disney Company, 2020, p. 2). Making the market value of Disney’s common stock at $339,163 million. The risk premium for Disney’s stock is 11.72% which is equal to the market risk premium plus