Description
Review the module resources on the cost of capital. There are specific strategies that many companies use so they can justify a new project. All these strategies involve a minimum required rate of return.Next, select a company in a specific industry. In your initial post, address the following:What company did you select? What industry is it in? Put your company and industry in the subject line. This must be a different company than your selected company for the final project.What is the weighted average cost of capital (WACC) for the company? Provide the source where you found the WACC or the performed calculation.What are some of the risks that the company and industry are facing in the economic and political environment that could impact the WACC? Research risks using financial publications (for example, Bloomberg, The Financial Times, The Economist) that are less than one year old. Cite your source. Model Resources: Corporate Finance Institute: Definition of WACC opens in new windowThe Corporate Finance Institute provides a detailed explanation of WACC and its components. It also provides a link to an online WACC Excel calculator and examines the use of WACC. This resource supports the Module Eight activity. After reading this resource, you should be able to answer the following:What are the components of WACC?How do you calculate WACC?How to Approach Weighted Average Cost of Capital Calculations opens in new windowThis is a short cheat sheet that demonstrates how to break down the complicated WACC formula and approach a set of problems. This sheet includes actual examples with calculations, and it may be helpful while completing the activity. After reviewing this resource, you will be able to answer the following:What is the process for using the WACC formula?Video: Working Capital and the Change in Working Capital in Valuation and Financial Modeling opens in new window(29:16)This video explains WACC from a financial point of view and examines its importance to a company’s value. It illustrates these points using three actual publicly listed companies and shows actual examples from financial statements and Excel calculations. This video supports the Module Eight activity. After viewing this video, you should be able to answer the following:Why is WACC important?What does change in capital mean?A captioned version of the video is available: Working Capital and the Change in Working Capital in Valuation and Financial Modeling (CC) opens in new windowVideo: Capital Structure (2023 Level I CFA® Exam—Corporate Issuers—Module 7) opens in new window(1:08:33)Specifically, review segments (24:00 – 39:00) to support the work in this module. This video discusses the cost of capital and factors that impact the cost of capital, including the financing needs and the costs of debt and equity. The video discusses the Modigliani-Miller Capital Structure Propositions and how to determine the optimal capital structure.A video transcript is available: Transcript for Capital Structure opens in new window.A closed-captioned version of this video is available: Capital Structure (CC) opens in new window.Website: Net Present Value opens in new windowThis resource defines and describes Net Present Value Website: Internal Rate of Return (IRR) opens in new windowThis resource defines and describes Internal Rate of return (IRR)Website: Modified Internal Rate of Return (MIRR) opens in new windowThis resource defines and describes Modified Internal Rate of Return.Website: Profitability Index opens in new windowThis resource defines and describes Profitability Index