Question

In: Accounting

Choose your favorite publicly-traded company other than Facebook that we did in class. Then, do the...

Choose your favorite publicly-traded company other than Facebook that we did in class. Then, do the following: 1) Calculate its beta using three-year historical prices 2) Calculate its re (cost of equity) 3) Calculate its rd (cost of debt) 4) Find out how much debt is has (see balance sheet and the notes that accompany it) 5) Calculate its market capitalization 6) Using the above information, calculate its WACC Please show all of your computations and submit the Excel file.

Expert Solution

Answer: I am choosing Amazon Inc.

Calculating Cost of Equity (Re) with the help of CAPM-

Re = Rf + Beta (Rm-Rf)

Where Re is cost of equity, Beta is the senstivity of return, Rf is risk free return, (Rm-Rf) is also called market risk premium.

Risk free rate of return = 10 year treasury constant maturity rate that is .62%

Market risk premium is 6% and Amazon's Beta is 1.54

Putting all the values in the formula, we get:

Re = .62% + 1.54 (6%)

Re = 9.86%

Calculating cost of debt (Rd)

Rd = Last year's interest expense / Book value of llast two years debt (Data as on Dec. 2019)

Rd = $1600 Million / $48175 Million

Rd = 3.3212%

Latest two years average Tax rate is 13.81%

Calculating WACC-

WACC = (% of Equity * cost of equity) + % of debt * Cost of debt (1-Tax rate)

WACC = .9517 * 9.86% + .0483 * 3.3212% (1-13.81%)

WACC = 9.52%

Note: Data is as per Dec. 2019.

Market capitalization = Number of shares outstanding * Current share price

Market capitalization = .504 Billion * 1900

As of today Amazon's market capitalization is $957.6 Billion.

ekkarill92 answered 2 years ago

Choose a well-known publicly traded company that none of your other classmates have chosen, and explain...

Choose a well-known publicly traded company that none of your other classmates have chosen, and explain what costs would be included in each of the three manufacturing cost categories. Include a link to this financial statement in your post. ( Adidas would be a good choice). A minimum of 150 words please.

This week's assignment is to do a thorough financial statement review of the publicly-traded company Facebook....

This week's assignment is to do a thorough financial statement review of the publicly-traded company Facebook. To complete the analysis, you will need to run the five most applicable liquidity ratios, the two most appropriate solvency measures, and the five most appropriate profitability measures. Include these in an excel document. I was not given any financial information for facebook.

Choose a well-known, publicly-traded company that none of your other classmates have chosen, and explain what...

Choose a well-known, publicly-traded company that none of your other classmates have chosen, and explain what costs would be included in each of the three manufacturing cost categories. Include a link to this financial statement in your post.

Why do publicly traded stocks tend to see more price volatility than publicly traded corporate bonds?

I would like you do identify a publicly traded manufacturing company. BY publicly traded it means...

I would like you do identify a publicly traded manufacturing company. BY publicly traded it means they have stock traded on an exchange such as the New York Stock Exchange. I would then like you to research a product they manufacture. Based on what you have found would they use process costing or job order costing. Why did you select the method they did. Please be sure to integrate terms and concepts you learned about in week three and four...

Company: Tesla 1. Identify a publicly-traded U.S.-based company (other than Target) in which you have some...

Company: Tesla 1. Identify a publicly-traded U.S.-based company (other than Target) in which you have some interest, and which has significant amounts of inventory. Such a company likely will be manufacturer (e.g., Tesla, Dover, Pfizer, Boeing, etc.) or (re)seller (e.g., McDonald’s, Costco, Home Depot, Kroger, CVS, etc.). 2. Obtain the latest audited annual financial statements for the company identified. Generally, that will mean either: a. Use the information in Appendix A of your text, Accessing the EDGAR Database through the...

Intermediate Accounting: RESEARCH PAPER You are going to choose a publicly traded company (Yum Brands). Publicly...

Intermediate Accounting: RESEARCH PAPER You are going to choose a publicly traded company (Yum Brands). Publicly traded companies who have their shares listed on stock exchanges are required to file regular financial statements and disclosures with regulators, such as the securities and exchange commission (SEC) in the United States. Among the most widely read of these are a company's annual report, which tells investors and analysts how the company has performed over the previous fiscal year (FY), how its businesses...

Please choose a publicly traded company to work on. You may select a company whose securities...

Please choose a publicly traded company to work on. You may select a company whose securities are traded on the NYSE, AMEX or NASDAQ. Please do not select a company that is a financial institution or services company. The company should sell merchandise. Part I Fill in some basic information about your company. Name of company ______________________________________ Principal exchange where the company trades _______________ Market price of the stock ________________ as of _____________ (date) Annual dividend ________________________________________ Last dividend paid...

Select a publicly traded company and a publicly traded, large partnership. Analyze how they are treated...

Select a publicly traded company and a publicly traded, large partnership. Analyze how they are treated for tax purposes. Describe the differences in taxation of their income, formation, dissolution, and liquidation, as well as the responsibilities borne towards creditors and taxing authorities by partners, shareholders, partnerships, and corporations. As a CPA in public practice, which type of business organization would you advise a client to adopt among sole proprietorships, various forms of partnerships, and various forms of corporations? MAKE A...

Choose a publicly traded company and answer the following questions: 1. Explain the importance of considering...

Choose a publicly traded company and answer the following questions: 1. Explain the importance of considering the financial risk of rivals, customers, suppliers, and other counter-parties. 2. Then discuss what company should take into consideration in terms of how it might affect their financial decisions. 3. Analyze and rank the level of time a company should spend on financial planning/protecting their business from risk and competitors.