Consider two companies: United States steel (X) and Facebook (FB). Look at the profiles (financial statements...

Consider two companies: United States steel (X) and Facebook (FB). Look at the profiles (financial statements for 2016) of each on yahoo finance and discuss the followings (you need to calculate these values yourself and show details of your calculations): How many outstanding shares the company has? What is the market value of the company? What is the book value of the company? What is the beta for the company? How do you find the risk free rate? (consider the market risk premium to be 8%) Using CAPM calculate the expected return on the equity for the company. (To get the required rate of return on debt, divide the interest expense by total debt) (To get the total debt, add the short term debt to long term debt) What is the Weighted average cost of capital (WACC) for the company? What is the leverage (total debt/equity ratio) for the company?

Solutions

Expert Solution

Solutions

( All these figures are considered and taken as on 31/12/2018 )

1. Outstanding shares of United States Steel = 177386430

Outstanding shares of Facebook = 2890000000

2. Market value of the company = Market price as on 31/12/2018 multiplied by Number of shares outstanding

Market value of United States Steel = 18.24 * 177386430 = $3235 million

Market value of Facebook = 131.09*2890000000 = $378850 million

3. Book value of a company is nothing but shareholder’s equity.

Book Value of United States Steel = $4202 millions

Book Value of Facebook = $84127 millions

4. Beta of United States Steel = 2.761

Beta of Facebook = 0.5768

5. To find the risk free rate we will consider the Treasury bill rate as on 31^st December 2018. This rate was 2.25%.

6. WACC Calculation

Debt equity ratio

United states steel = 2602/3235 =0.80

Facebook = 6190/378850 =0.016

jeff jeffy answered 3 months ago

Next > < Previous

Related Solutions

a) Facebook (ticker: FB) is a listed company on the NASDAQ. Look at the daily share...

a) Facebook (ticker: FB) is a listed company on the NASDAQ. Look at the daily share price of the company for the period 1st January 2018 to 1st July 2018. Identify any major news, events or issues related to the company that impacted the share price by 5% or more on the day of release. You should include a price chart at bare minimum, with annotation, which clearly shows each major news impact on the price. Include at least two...

If the Korean steel industry subsidizes the steel that it sells the United States, the a....

If the Korean steel industry subsidizes the steel that it sells the United States, the a. United States should protect its domestic steel industry from this unfair competition. b. harm done to U.S. steel producers from this unfair competition exceeds the gain to U.S. consumers of cheap Korean steel. c. harm done to the U.S. steel producers is less than the benefit that accrues the U.S. d. United states should subsidize the products it sells to Korea.

What might a companies recruitment, selection, training, compensation/motivation look like in the United States?

What is the difference between the financial characteristics of Korean companies and the United States?

Compare GASB financial statement requirements of United States with United Kingdom. Would the same financial statements...

Compare GASB financial statement requirements of United States with United Kingdom. Would the same financial statements be used and why?

Analyzing Financial Statements of United States Based Corporations Scenario Each student is to select a United...

Analyzing Financial Statements of United States Based Corporations Scenario Each student is to select a United States based public (shares are listed on a major stock exchange) company for this project. You will need to locate the company's income statement and balance sheet for the past two years. The project is to be completed Individually - this is not a group project. Requirements 1. For each year please determine/calculate the following: * Net income * Net income before taxes *...

12.) Facebook reports that 70% of their users are from outside of the United States and...

12.) Facebook reports that 70% of their users are from outside of the United States and that 50% of their users log on to Facebook every day. Suppose 20% of their users are United States users log on every day. a) What percentage of Facebook’s users are from the United States? b) What type of probability is the 20% mentioned above? c) Construct a contingency table showing all the joint and marginal probabilities. d) What is the probability that a...

1. A closer look - Food insecurity in the United States According to the United Nations...

1. A closer look - Food insecurity in the United States According to the United Nations Food and Agriculture Organization, approximately 795 million people are chronically undernourished worldwide. Undernutrition means that a person consumes insufficient energy to meet his or her metabolic needs. Many food security organizations set this minimum at 2,000 kcal/day for a person to be well nourished. Examine the figure depicting the food security status of U.S. households and then answer the question that follows. 1....

financial community in the United States

The financial community in the United States has become increasingly concerned with the quality of reported company earnings.Required:1. Define the term earnings quality.2. Explain the distinction between permanent and transitory earnings as it relates to the concept of earnings quality.3. How do earnings management practices affect the quality of earnings?4. Assume that a manufacturing company's annual income statement included a large gain from the sale of investment securities. What factors would you consider in determining whether or not this gain...

Consider the following two-letter acronym of the following states in the United States: MD - Maryland,...

Consider the following two-letter acronym of the following states in the United States: MD - Maryland, FL - Florida, PA - Pennsylvania, Ga - Georgia, CA - California, NY - New York. Imagine that some students from the above-listed states are at a conference. Using a switch control structure write a C++ program that prompts a student at the conference to enter the two-letter acronym of his/her state and let the program print the student's state and welcome the student...

Subjects