FIN 304 |
Prof. Cooper |

**Estimating the Cost of Capital**

You and your partner have been assigned by your firm’s CFO to estimate your firm’s current weighted average cost of capital. Write a **detailed memo** (and include any relevant Excel documentation) to your CFO outlining the process you took to estimate the WACC. Please see the questions and instructions below for things to include in the memo (you can include anything additional that you feel would be important for the CFO to understand and know – this list is the minimum to include).Calculations should be detailed in your document so that the CFO can clearly see how everything was done. Please include and reference any websites and sources used to arrive at your estimated values. For this assignment, it is extremely important to be detailed about how you arrived at each estimate and to go through any assumptions that were made in the process. The memo should be handed in as a hard copy and if you have a separate Excel file that file should be sent to me via Blackboard by the beginning of class on **Thursday, November 7, 2013**. Try to keep all calculations and information within the body of the memo (Excel can be used and referred to as an appendix). This case must be done with a partner from this class—please only hand in one case per team and clearly label each contributor.

1. Select a publicly-traded company and notify Prof. Cooper of your decision (in class or via e-mail) so we do not have duplicate analyses.

2. Estimate your company’s weighted average cost of capital.

a. Estimate the weights (debt and equity).

b. Estimate the cost of equity.

c. Estimate the cost of debt.

d. Calculate the weighted average cost of capital.

3. What are your recommendations to the CFO regarding using this cost of capital number?

a. Should he or she use this number for all firm projects?

b. When should the CFO think about re-estimating the WACC?

4. Look at Damodaran Online (http://pages.stern.nyu.edu/~adamodar/) and check out how your estimate compares to industry cost of capital estimates (also a good place to start to figure out some assumptions and estimates).

5. The memo should be addressed to your firm’s CFO.

w walmart is the company to chose

Subject | Business |

Due By (Pacific Time) | 11/07/2013 12:00 am |

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