4219 AU21 Case 2 - Individual Assignment #2 Rubric Section #: Class Time:

WACC = [rd x (1 - TAX) x (D/V)] + [re x (E/V)]

A B C D E F
If NO (from
Is Kyle's input
Kyle's input to this Why? (your column C),
Variable correct? YES Additional Notes
variable (from the case) notes) input correct
or NO
value here
Cost of Debt (rd) 3.188% NO Kyle's calculait 2.002%
Tax Rate % 20% NO Since the average 25%
Value of Debt (D) 849 YES From exhibit 5 849
Weight of Debt (D/V) 18.00% YES From exhibit 5 18%
Cost of Equity (re) 4.110% NO Divident yield ca 5.87%
Value of Equity ( E ) 3846 YES From exhibit 5 3846
Weight of Equity (E/V) 82.00% YES From exhibit 5 82%
Total Capital (V = D + E) 4695 YES From exhibit 5 4695
WACC 3.829% NO WACC should have 5.08%

My WACC is higher than Kyle's estimate since there are a lot of correction of the element of WACC, such as cost of debt, tax rate, and cost of equity. The reason why cost of debt is incorrect is that Kyle
didn't include weighted average of current debt and noncurrent debt. Tax rate becomes higher since the tax rates of 2014 and 2015 are higher than 20%. For the calculation of cost of equity, the risk-free
rate is replaced 1.55 to 2.10 of which is the average of 10-year bond yield.