Week 6 – Assignment: Estimate and Forecast Changes in Bond and Stock Prices

Instructions

Use the That’s WACC. The Best WACC Calculator.

to generate estimates of the weighted average cost of capital (WACC) for five different companies (pick companies from different industries such that you find a relatively wide range of WACC estimates):

Build a three column table displaying the full company name and its stock symbol in the first column, a brief description of the company and its main line(s) of business in the second column, and the company’s WACC estimate (the value given in the From Financial Statements column) in the third column.

Below your table, write an essay discussing the importance and process of calculating the weighted average cost of capital. The list below suggests some (though not all) of the topics that you should address in your paper:

Why do firms need to know this value?

How is the weighted average cost of capital used to make decisions?

What are each of the components of the weighted average cost of capital and how are each of these components estimated?

What are some possible reasons for why the WACC’s in your table differ from one another? Be sure to discuss the relationship between risk and expected return as reflected in bond and stock yields.

You must use a minimum of three (3) scholarly sources for your paper.

Length: 3-4 pages not including title page and references

Your response should demonstrate thoughtful consideration of the ideas and concepts presented in the course and provide new thoughts and insights relating directly to this topic. Your response should reflect scholarly writing and current APA standards.

Please visit these sites for help:

http://www.investinganswers.com/financial-dictiona…

http://accountingexplained.com/misc/corporate-fina…