Explore BrainMass

Explore BrainMass

    Weighted Average Cost of Capital (WACC)

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Please see the attached file for the fully formatted problems.

    5). Calculate the W.A.C.C. of the company and Compare to the R.O.I.C as derived from EVA.
    a. Use data from the financial statements.
    b. Use published interest rates on the notes to the financial statements.
    c. Cost of equity estimation.
    d. Example of WACC from large firms
    e. Method firm uses to determine cost of Retained Earnings?
    a. CAPM?
    b. DCF?
    c. Bond Yield Plus Risk Premium Approach?
    d. Other?

    INFORMATION:

    Calculate the Weighted Average Cost of Capital for Solectron, Inc.

    10-year bond - 10
    Beta: 3.079
    Required rate of return: 12.2

    For the purposes of the project, utilize the Capital Asset Pricing Model (CAPM) and the Discounted Cash Flow Method (DCF) to determine the cost of retained earnings for this analytical project.

    Capital Structure of Solectron

    Long-term Debt $1,824.40
    Preferred Stock Equity $0
    Working Capital $1,718.90
    Total Assets $6,529.50
    Stockholder Equity $1,422.00
    Total $11,494.8

    *Data charted in millions

    2003 2002 2001 2000 1999
    Working capital $1,718.90 3,654.80 6,014.80 5,411.40 3,162.70
    Total assets 6,529.50 11,014.00 13,079.90 10,375.60 5,420.50
    Long-term debt 1,824.40 3,183.90 5,027.50 3,319.50 922.70
    Stockholders' equity 1,422.00 4,722.70 5,150.70 3,802.10 3,166.90

    *Charted data in millions.

    Stockholder Equity

    2003 2002 2001
    Number of shares Outstanding 64 63.2 47.9
    Number of shares Exercisable 37.5 36.4 27.0
    Weighted Average Exercise Price $2.29 $6.97 $17.91

    Capital Expenditures

    © BrainMass Inc. brainmass.com June 3, 2020, 5:04 pm ad1c9bdddf
    https://brainmass.com/business/finance/weighted-average-cost-of-capital-wacc-13254

    Attachments

    Solution Summary

    Financial statements are used to answer questions related to WACC. It is posible that answers to some questions are not complete.

    $2.19

    ADVERTISEMENT