Indicate what the WACC value you derived means for your company. What role does the WACC play for company managers when they are evaluating new projects to undertake?
Company Cost of Capital Analysis
In this assignment you calculate and interpret the cost of capital forFORD MOTOR COMPANY by conducting a detailed analysis of the company’s Weighted Average Cost of Capital (WACC).
1. Calculation of WACC
You need to identify each component of the WACC formula and calculate the overall WACC.
The WACC formula for a company that uses debt and equity is as follows:
WACC = % Debt * Cost of Debt * (1 – Tax Rate) + % Equity * Cost of Equity
You should use Yahoo! Finance to identify all financial statement inputs. You can use the following guide for the inputs. The specific financial statement data are found on the relevant financial statement.
Cost of Equity = Risk free rate + Beta * (Market Risk Premium)
2. Interpretation of WACC for Your Company
Indicate what the WACC value you derived means for your company. What role does the WACC play for company managers when they are evaluating new projects to undertake? How would company managers and investors use the WACC for an overall company valuation analysis?
3. Paper Mechanics
Please complete your work in Excel. For the calculation section of the assignment each parameter its data and the corresponding calculations should be clearly indicated and easy to follow. Your spreadsheet should be professional in its presentation with appropriate formatting and organization.