Question: If I could receive some guidance on this problem, that would be great: You need to estimate Walt Disney Company's WACC. Your task involves finding
If I could receive some guidance on this problem, that would be great:
You need to estimate Walt Disney Company's WACC. Your task involves finding relevant data for estimating the WACC. Please create Excel Spreadsheet (for questions 1 to 7) as instructed below.
Important: All the data and other information you will need for this case can be downloaded from any sources that may be convenient for you. https://finance.yahoo.com/ is a good source for all such data and information.
Steps Are:
-Download 10-yr T-Bond Yield (rate) for the last 252 days from today (or the date when Module 6 started) on a spreadsheet and label it as T-Bond-rate
-Calculate the Average, Standard Deviation, Standard Error, and 95% confidence interval of 10-yr T-Bond data you have downloaded in step 2 and show the results in spreadsheet T-Bond rate as well as in the solution sheet by linking the results
-Download Walt Disney stock closing price (Ticker Symbol: DIS) for the from today (or the date when Module 6 started) on a separate sheet and label it as Disney-Equity-Price
-Calculate the Average, Standard Deviation, Standard Error, and 95% confidence interval of Walt Disney closing price data you have downloaded in step 3 and show the results in the spreadsheet Disney-Equity-Price as well as in the solution sheet by linking the results
-Read the most recent Equity Beta of Walt Disney at https://finance.yahoo.com/ and record it in the solution sheet along with the date of your recording.
1.Read ( Calculate) the number of shares of Walt Disney outstanding from https://finance.yahoo.com/ and record it in the solution sheet. The number of shares is not readily available at yahoo. You may have to do some simple calculations to obtain it.
2.Compute the weights ( with respect to the total asset value) for Disney's equity and debt based on the market value of equity taking the average equity price you calculated in step 4 above, number of shares outstanding for Disney from step 6 above, and Disney's market value of debt of $17,314 Million.
3. Calculate Disney's cost of equity capital using the CAPM, the average risk-free rate which is the 10 yr T-bond rate you calculated in step 2 above, the value of beta recorded in step 5 above, and an average market return of 5%.
4. Calculate the 95% confidence interval of Disney's equity cost of capital using the calculation you made in step 2 above and assuming the value of Beta and average Market Return as before.
5. Assuming that Disney has a tax rate of 20% and cost of debt 4.018%, calculate its after-tax debt cost of capital.
6. Calculate Disney's Unlevered and Levered WACC.
7. Calculate Disney's net debt by subtracting its cash value of $4,333 Million from its debt. Recalculate the weights for the WACC using the market value of equity, net debt (=Total Debt -Cash), and cash adjusted asset value. Recalculate Disney's Levered WACC using the weights based on the net debt. How much is change in terms of percentage from its non-cash adjusted Levered value of WACC?
Please perform the analysis using the Excel spreadsheet. Please provide where you found your original sources. Please put your comments in explaining your work in the spreadsheet with a short note.
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