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Finding the WACC and the Target Capital Structure

I need to find the WACC (all three) for PG&E, which is a power company in northern California. Their website is pge.com. I have been trying to do it on my own, but somehow the numbers don't match up.

1. What is the WACC of PG&E Corp. (PCG)?
2. What is PG&E's target capital structure

Solution Preview

** Please see the attached file for the complete Excel formatted solution **

WACC is calculated by the following formula:

WACC = Value of Firms' Equity x Cost of Equity + Value of Firms' Debt x Cost of Debt x (1-Tax Rate)
Value of Firm's Equity + Debt Value of Firm's Equity + Debt

First step is to compute the value of various capital source

option 1 - Market value as of the end of Previous Year

Market value of a firm's Equity is calculated by multiplying the firm's current stock price by its outstanding number of shares.

No of shares outstanding as at December 31, 2011 412,257,082
Stock price as at December 31, 2011 $41.22 ...

Solution Summary

In this solution we explain how to determine the weighted average cost of capital (WACC) for a particular business and how to determine the businesses target capital structure.

$2.19