Weighted Average Cost of Capital (WACC)

Project This project will allow you to apply the concepts and tools covered in the class to a real-world situation. In this report, you will present an estimate of a publicly traded companys weighted average cost of capital. This report involves: 1. Select your own company with the following characteristics: I choose Ford Motor Company (F) a. it should not be a brokerage house or finance related firm. b. only select firms which have their Beta listed in finance.yahoo.com or similar finance websites (google finance, Morningstar etc.), and have long term debt (non-convertible debt) in their capital structure. c. it should have its stock and bond prices quoted in 2. Presenting the following by estimating (do not forget to answer the questions listed under c below): a. The companys expected return on its common stock b. The companys expected return on its preferred stock (if any). c. The companys average expected return on its bonds. d. The firms WACC. e. Write a paragraph on the following issue: – What can the firm do to lower their cost of capital? List different scenarios by considering the different components of WACC. 3. Keeping in mind the following presentation style: State in clear and simple terms how you came up with all estimates. Identify all the assumptions and models used to derive the estimates. As far as it is relevant to the presentation of the estimates, explain the workings of these models. Keep the report clear and concise. In order to present these estimates, you will need to calculate: a. The firms cost of equity using: CAPM or Discounted Cash Flow (DCF) models b. The firms cost of long-term debt and preferred stock c. Cost of capital of the firm (WACC) Important notes: 1. Do not based on the information of Chat GPT. 2. You can easily find the data needed for this report by using online resources such as finance.yahoo.com, morningstar.com, marketwatch.com, bloomberg.com etc. Bond prices can be found at 3. please cite all the sources you use.