Explore BrainMass

Calculating WACC for Harley Davidson

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

I am trying to complete this practice problem in preparation for a final assignment.
I would like to see it done correctly so i can point out where i am going wrong

Calculate the cost of capital (show calculations) for Harley Davidson using the
Weighted average cost of capital method using the following information from their annual report.

© BrainMass Inc. brainmass.com October 24, 2018, 6:36 pm ad1c9bdddf


Solution Preview

The weighted average cost of capital is found by multiplying the various components of the capital structure (debt and equity) with their respective costs and then adding them up. Then dividing this sum by the total capital to get the WACC. In this situation, we have to use only the annual report to get the data.

Calculating the cost of equity - The cost of equity can be calculated by using the dividend discount model. For this, first we find the growth rate of dividends. From the annual report, we see that the dividends have increased from $0.035 to $0.405 over the period 1994 to 2004 (page 38). We can find the compound rate of growth using the compound interest formula which is
CI = P * (1+r/100)^n
Here CI is 0.405, P=0.035 , n= 10 years, we need to get r. Substituting in the equation, we get

Solution Summary

The solution explains how to calculate the WACC using an annual report.

See Also This Related BrainMass Solution

Comparable firms for a PE analysis - Harley Davidson

Harley Davidson

Use comparable firms for a PE analysis.

Find three firms that can serve as comparables for your firm. Prepare a PowerPoint presentation (using both the slides and instructors notes sections of PowerPoint) to:

Explain why you selected these firms.
Explain why the comparable firms are not identical to your firm.
Calculate and present the PE ratio for each of the comparable firms and your firm.

This has to be done on PowerPoint please

View Full Posting Details