Cost of Capital - for Kraft Foods organization (KFT)
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Estimate the weighted-average cost of capital for Kraft Foods (KFT).
---Feel free to use any other sources you like.
- Recent financial statements of most public companies: http://www.secfilings.com/
- Stock prices: http://finance.yahoo.com.
---1. Estimate the organization's cost of equity capital based on the Capital Asset Pricing Model.
---2. What is the organization's asset beta (its unlevered equity beta)?
---3. What is your estimate of the organization's weighted-average cost of capital? Clearly indicate what data you used and show how you calculated the WACC.
---4. What is your estimate of the organization's unlevered cost of capital? Clearly indicate what data you used and show how you calculated the unlevered cost of capital.
---5. Why might you want to know a company's unlevered cost of capital?
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Solution Summary
The cost of capital for the Kraft Foods Organization is examined. The organizations asset beta is determined as well as the weighted-average cost of capital.
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COST OF CAPITAL - for Kraft Foods organization (KFT)
1. Estimate the organization's cost of equity capital based on the Capital Asset Pricing Model.
Answer:
As we know that, The Capital Asset Pricing Model (CAPM) is:
Here,
Ke= Cost of Equity
Rf= Risk free rate
Rm= Market rate of return, and
β= Beta, systematic risk
Now,
To calculate the market rate of return dividend yield from the sector is taken and also the five year dividend growth in the food ...
Education
- MBA, Indian Institute of Finance
- Bsc, Madras University
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