Ford Motor Company

Kyle Berkman, a mid-level manager and currently your managing director at Ford Motor Company has asked you and your team to evaluate the discount rate used to determine the NPV on a project to update equipment at one of their more antiquated facilities.

Kyle has provided the following instructions:

Yield to Maturity

1. Use the following link to obtain the most recent bond price for the company.

https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C41993&symbol=F.GN

2. In the form below, record the relevant information for the bond
3. Calculate the yield to maturity for the bond
   • Assume the bond has 10 years left to maturity
   • Assume annual coupons
   • Assume the bond will pay its next coupon one year from today
   • Using these assumptions back out a yield to maturity
4. Record all of this information on the form provided below

Expected return to equity:

1. Use the following link to Yahoo finance to obtain the beta for Ford Motor Company:

https://finance.yahoo.com/quote/F/

2. Record all of the equity information required on the form below
3. Use the following link to Treasury Direct to obtain the current one-month (1 Mo) risk-free rate.

https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield

4. Use the following link to obtain the average S&P 500 return per year using at least 25 years of historical data.

https://www.officialdata.org/us/stocks/s-p-500

5. Enter all of the relevant information for the risk-free rate and average S&P 500 return in the form below.

Tax rate:

• Assume a current corporate tax rate of 35%

Data Entry Form:

Copy and paste instructions:

Use paste special > Text only when copying and pasting into the forms below.

Debt Information:		Format
Issuer Name:	Click or tap here to enter text.	from webpage
Maturity Date:	Click or tap here to enter text.	##/##/####
Coupon rate:	Click or tap here to enter text.	##.##%
CUSIP:	Click or tap here to enter text.
Last Trade Price	Click or tap here to enter text.	##.####%
Face Value	$1,000
Last Trade Yield	Click or tap here to enter text.	##.####%
Last Trade Date:	Click or tap here to enter text.	##/##/####

Equity Information:		Format
Company Name:	Click or tap here to enter text.	from webpage
Beta:	Click or tap here to enter text.	#.##
Market Cap:	Click or tap here to enter text.	$###.##

Risk-free & risk premium Information:		Format
Risk free rate:	Click or tap here to enter text.	##.##%
Average S&P return:	Click or tap here to enter text.	##.##%

Computations:

Use the information collected above to compute the following values. Make sure to follow any stated assumptions:

Cost of Debt:
Yield to maturity:	Compute the yield to maturity for the above bond under the following assumptions: 10 years left to maturity Annual coupons Next coupon paid in 1 year Click or tap here to enter text.

Cost of Equity:
Market risk premium:	Click or tap here to enter text.
Expected return to equity using the CAPM	Click or tap here to enter text.

Weighted Average Cost of Capital (WACC):
Assumptions: Market value of equity: Use the market cap recorded above Market value of debt: Assume that Ford has $100B in Debt outstanding
Percent of firm financed with debt (D/V):	Click or tap here to enter text.
Percent of firm financed with Equity (E/V):	Click or tap here to enter text.
Weighted Average Cost of Capital (WACC)	Click or tap here to enter text.