For Hershey Company (HSY) Two excel WACC (weighted average cost of capital) calculations, one using the...

For Hershey Company (HSY) Two excel WACC (weighted average cost of capital) calculations, one using the Cost of Equity from the SML (aka CAPM) Approach and another WACC calculation using the Dividend Growth Model Approach for Cost of Equity. Include a discussion explaining which Approach you prefer for WACC and why

Expert Solution

Hi! Please check the attached picture for the solution.

CAPM model eliminate the unsystematic risk and takes into account systematic risk. While on other hand in gordan growth model, growtj assume as a constant.

So, CAPM model is right to the find cost of capital for WACC calculations.

Thank you.

ekkarill92 answered 2 years ago

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