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(solution) The company I am opting to research is Starbucks (SBUX) or any


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I am seeking assistance with a finance assignment. The assignment instructions are attached as well as a template for what the assignment should look like. Thank you.


The company I am opting to research is Starbucks (SBUX) or any other company that helps facilitate

 

the assignment for yourself. You may utilize the template I provided in the other attachment as a

 

reference point as to how the assignment is to look. Thank you.

 

Project

 

The purpose of this project is for you to have some practice working with financial concepts in the real

 

world. This will involve integrating some material from throughout the course. The project will also

 

involve the development of your own approach to doing the work. The project does not provide a stepby-step procedure for you to follow.

 

Your task is to determine the WACC for a given firm using what you know about WACC as well as data

 

you can find through research. Your deliverable is to be a brief report in which you state your

 

determination of WACC, describe and justify how you determined the number, and provide relevant

 

information as to the sources of your data.

 

You have selected a company for which to research and find the WACC. Your research is to be

 

independent from any information you may find at thatswacc.com or similar sites, although you might

 

want to use such sites to provide a reasonableness check on the WACC that you calculate.

 

Assumptions

 

As you recall, the formula for WACC is rWACC = (E/E+D) rE + D/(E+D) rD (1-TC)

 

The formula for the required return on a given equity investment is ri= rf + ?i * (RMkt-rf)

 

RMkt-rf is the Market Risk Premium. For this project, you may assume that the Market Risk Premium is

 

4%, unless you can develop a better number. rf is the risk-free rate. The YTM on 10-year U.S. Treasury securities is a good approximation.

 

You may assume a corporate tax rate of 40%.

 

One good source for financial data for companies as well as data about their equity is

 

http://finance.yahoo.com. By looking around this site, you should be able to find the market

 

capitalization (E) as well as the ? for any publicly traded company.

 

There are not many places left where data about corporate bonds is still available. One of them is

 

http://finra-markets.morningstar.com/BondCenter. To find data for a particular company?s bonds, find

 

the Quick Search feature. Then, be sure to specify corporate bonds and type in the name of the issuing

 

company. This should give you a list of all of the company?s outstanding bond issues. Clicking on the

 

symbol for a given bond issue will lead you to the current amount outstanding and the yield to maturity.

 

You are interested in both. The total of all bonds outstanding is D in the above formula. If you like, you can use the YTM on a bond issue that is not callable as the pre-tax cost of debt for the

 

company.

 

Deliverable

 

Write a two or three page report that contains the following elements:

 

1. Your calculated WACC

 

2. How data were used to calculate WACC. This would be the formula and the formula with your

 

values substituted.

 

3. Sources for your data.

 

4. A discussion of how much confidence you have in your answer. What were the limiting

 

assumptions that you made, if any?

 


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