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Wal-Mart: Compute the Weighted Average Cost of Capital (WACC)

Using the same public firm (WAL-MART), compute the weighted average cost of capital (WACC).

Equity market values (capitalization or cap value) for your company can be found on any financial website like Yahoo Finance among others.

For the cost of equity, use the CAPM rate calculated in week 2.

Assume the market value of the long term debt is equal to the book value.

The cost of debt can be found (a) from the debt footnote in the company's 10K financial statement (if not provided, you can calculate by computing the annual interest expense for each debt instrument and dividing total debt by that interest amount) or (b) dividing the average long term debt (including the current portion) on the balance sheet by the interest expense on the income statement to obtain a rough estimate.

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Solution Summary

The expert computes the weighted average cost of capital. Equity market values are determined.

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