Question: This project will allow you to apply the concepts and tools covered in the class to a real-world situation. In this report, you will present
This project will allow you to apply the concepts and tools covered in the class to a real-world situation. In this report, you will present an estimate of a publicly traded company's weighted average cost of capital. This report involves:
- Select your own company with the following characteristics: Intel Corporation
a. it should not be a brokerage house or finance related firm.
b. only select firms which have their Beta listed in finance.yahoo.com or similar finance websites (google finance, Morningstar etc.), and have long term debt (non-convertible debt) in their capital structure.
c. it should have its stock and bond prices quoted in
https://markets.businessinsider.com/bonds
- Presenting the following by estimating (do not forget to answer the questions listed under c below):
- The company's expected return on its common stock.
- The company's expected return on its preferred stock (if any).
- The company's average expected return on its bonds.
- The firm's WACC.
- do a paragraph on the following issue:
- What can the firm do to lower their cost of capital? List different scenarios by considering the different components of WACC.
- Keeping in mind the following presentation style:
State in clear and simple terms how you came up with all estimates. Identify all the assumptions and models used to derive the estimates. As far as it is relevant to the presentation of the estimates, explain the workings of these models. Keep the report clear and concise.
In order to present these estimates, you will need to calculate:
- The firm's cost of equity using: CAPM or Discounted Cash Flow (DCF) models
- The firm's cost of long-term debt and preferred stock
- Cost of capital of the firm (WACC)
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