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Estimate the weighted average cost of capital of a publicly-traded company: Telus. Although you must use...

Estimate the weighted average cost of capital of a publicly-traded company: Telus. Although you must use the most recent stock market data, you should use the 2019 Annual Report for the financial statement information.

Expert Solution

Total Capital = Debt + Equity

WACC = (Equity / Total Capital) * COE + (Debt / Total Capital) * COD * (1 - Tax Rate)

COD = Cost of Debt

COE = Cost of Equit

Details of telus corps on 31.03.2019 ($millions)

Long term debt -17142 (book value)

Equity –(10659)

Weight of

weight of equity = E / (E + D) = 10659/(10659+17142)=38.34%

weight of debt = D / (E + D) = 17142/27801=61.66

Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)

Cost of Equity = 0.66% + 0.65 * 6% = 4.56%

Cost of Debt:4.2286(last two year average)

Average tax rate=24

Wacc=EUITY/E+D*COST OF EQUITY + DEBT/E+D*COST OF DEBT*(1-TAX)

=4.56%*38.34/100 + 4.2286(.76)61.66/100

=1.7483%+1.9815%

=3.72%

Total Capital = Debt + Equity

WACC = (Equity / Total Capital) * COE + (Debt / Total Capital) * COD * (1 - Tax Rate)

COD = Cost of Debt

COE = Cost of Equit

Details of telus corps on 31.03.2019 ($millions)

Long term debt -17142 (book value)

Equity –(10659)

Weight of

weight of equity = E / (E + D) = 10659/(10659+17142)=38.34%

weight of debt = D / (E + D) = 17142/27801=61.66

Cost of Equity = Risk-Free Rate of Return + Beta of Asset * (Expected Return of the Market - Risk-Free Rate of Return)

Cost of Equity = 0.66% + 0.65 * 6% = 4.56%

Cost of Debt:4.2286(last two year average)

Average tax rate=24

Wacc=EUITY/E+D*COST OF EQUITY + DEBT/E+D*COST OF DEBT*(1-TAX)

=4.56%*38.34/100 + 4.2286(.76)61.66/100

=1.7483%+1.9815%

=3.72%

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