BUS 5440 Google WACC Project
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Google WACC Project
In this project, you will find and discern the appropriate data
to determine a realistic assessment of the weighted average cost of capital for
Google.
You will need to search for data from several sources, use
subjective judgment to determine which data to use or discard, use subjective
judgment to determine which calculation gives a more acceptable estimate and
make some simplifying assumptions.
The purpose of the projects is to show some of the sources of
measurement errors in financial analysis, to introduce the diverse sources of
publicly available financial information and to develop skill in analysis in
situations where there are too much or too little data.
Pages showing equations with data and brief description
There is no page length given for this as it can vary greatly.
This section is to be divided up based on the topics.
In each section, you must show and explain the equations that
are used. In addition, you are to draw any conclusions on the company you can
from this data. Please note that detailed worksheets showing all of the
calculations for this section are to be included in an appendix.
Cost of Equity (Common Stock)
Beta from Regression and two Betas from
analysts
Beta Chosen for CAPM and why
Capital Assets Pricing Model (include how determined RF and[ RM or
(RM – RF)]
Discounted Cash Flow (DCF) (only if dividends – include how
determined)
Own-Bond-Yield-plus-Judgmental-Risk-Premium (include how
determine risk premium)
Cost of Preferred Stock
Cost of Debt (make sure to include table that lists all bond
issues with weighted average cost of debt)
Market Value of Debt (will have calculated above, but will need
to add any long term leases from balance sheet to get total market
value of debt)
Market Value of Equity
Market Value of Preferred Stock
Value of Firm
Firm’s Tax Rate (explain how determined)
Weight for Equity
Weight for Preferred Stock
Weight for Debt
WACC (Weighted Average Cost of Capital)
Assumptions
Including but not limited to RF , RM, RPM (which
- RF),growth
rate of dividends. This page should have a brief description of how you came up
with the estimates with spreadsheets, etc. to be put in the appendix.
Appendix
Appendix should include all relevant data including debt data
from Morningstar, calculations of weighted average cost of debt, stock returns,
betas from analysts, beta regression analysis, method/sourcing for RF and RM, growth
rates for dividends, different methods to determine tax rates, etc. Detailed
descriptions, tables of data and excel sheets etc will be in the appendix.
References
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