Chat with us, powered by LiveChat Using concepts learned during the class, estimate the weighted average cost of capital (WACC) for your company. The process involves several key steps: - Wridemy

Using concepts learned during the class, estimate the weighted average cost of capital (WACC) for your company. The process involves several key steps:

 Company Name – GM Motors

Part 1: WACC Calculation (In section1 use regression to find BETA)

Using concepts learned during the class, estimate the weighted average cost of capital (WACC) for your company. The process involves several key steps:

  1. Cost of Equity Calculation using CAPM Model:
    • Estimate beta for your company using regression analysis. Estimate beta using daily prices for past one year, weekly prices for the past two years, and monthly prices using the past five years. Do you get different beta using three approaches? Why? Which beta is the most appropriate beta for your company? Explain your reasoning in the excel document itself.
    • Estimate the cost of equity by employing the Capital Asset Pricing Model (CAPM), factoring in your company's appropriate beta. Utilize an appropriate risk-free rate and a market risk premium of 6% for your calculation. 
  2. Cost of Debt Estimation:
    • Estimate the appropriate cost of debt for your company. You can use different approaches to estimate cost of debt.
      • Credit rating and Yield-spreads.
      • If credit rating is missing, find rating of firms in the same industry and similar size.
      • Adjust for expectations of changes in the future interest rates based on your economic analysis.
      • Explain your analysis in the excel document.
  3. Capital Structure Weight Calculation:
    • Determine the capital structure weights of equity and debt based on the current market values of equity and debt. This involves calculating the proportion of total capital represented by equity and debt.

By meticulously completing these steps, you'll arrive at a comprehensive understanding of your company's WACC, a vital metric used in investment decision-making and capital budgeting.

Part II: Pro-forma statements

Select the appropriate explicit forecast period for your company, ensuring it spans a minimum of 5 years and a maximum of 10 years. Utilize this chosen forecast period to estimate pro forma income statements and balance sheets for your company for the upcoming 5 to 10 years.

Part III: Free cash flow estimation and discounted cash flow valuation

As discussed in class, estimate free cash flow to firm and free cash flow to equity for your company. Using WACC estimates in part-I, estimate fair value of stock using discounted cash flow methodology. Which of the two approaches (FCFE vs FCF) is suitable for your firm? why?

Deliverable: Submit an Excel spreadsheet containing all pertinent details. Format the spreadsheet to enhance clarity and ease of understanding. Explicitly state the basic assumptions underlying your estimates for transparency and coherence. Use your excel to explicitly state your major assumptions and rationale for these assumptions.

    Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.

    Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.

    Do you need an answer to this or any other questions?

    About Wridemy

    We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.

    How It Works

    To make an Order you only need to click on “Place Order” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.

    Are there Discounts?

    All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.

    Hire a tutor today CLICK HERE to make your first order