You selected AT&T (T) from the stock market; In this discussion, I want you to estimate (calculate) the company's capital cost (the WACC).

You need to estimate three more parameters in the formula besides the cost of equity that you already have:

(1) the cost of debt,

(2) the weight on debt, and

(3) the weight on equity.

To estimate the weights, first calculate the company's value as the addition of the book value of financial debt plus the market value of equity, also known as Market capitalization. The weight on debt is the book value of the financial debt over the company's value, and the equity value is just one minus the weight on debt. Assume that the cost of debt is the current risk-free rate plus 4 percent. Use a corporate tax rate of 21 percent.

After you estimate the cost of capital, share your results with us and comment on the following questions:

Do you think your company's WACC will increase or decrease in the future? Explain your reasoning based on the components (variables) that determine the value of the WACC.

Answer rating: 100% (QA)

You selected ATT T from the stock market In this discussion I want you to estimate calculate the companys capital cost the WACC You need to estimate three more parameters in the formula besides the co... View the full answer