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# Module 6: Weighted Average Cost of Capital - PowerPoint PPT Presentation

Module 6: Weighted Average Cost of Capital. Brian Phelan. Agenda. Background Beta Cost of equity Cost of debt WACC. Background. Restructuring Billions in Impaired acquisitions Layoffs 5 year plan -> growth by 2015. HP SWOT Analysis.

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### Module 6: Weighted Average Cost of Capital

Brian Phelan

• Background

• Beta

• Cost of equity

• Cost of debt

• WACC

• Restructuring

• Billions in Impaired acquisitions

• Layoffs

• 5 year plan -> growth by 2015

Source: OvidijusJurevicius at Strategic Management Insights

• Nasdaq.com

• Finance.yahoo.com

• Macroaxis.com

• Nyse.com

• Firstrade.com

• Zacks.com

• Data.cnbc.com

• Investing.money.msn.com

• 0.92

• 1.75

• 1.75

• 1.47

• 1.75

• 1.46

• 1.47

• 1.45

• 95% confidence : 0.912 ≤ β ≤ 1.014

• rEq= rrf + [β*(rMkt– rrf)]

• = 3.685% + [0.941*( 7.685% – 3.685%)]

• 7.449% = req

• rD= Pretax borrowing rate x (1 – Tax Rate)

• = (621/19198) x (1 – 21.46%)

• 2.539% = rD

• VD = \$3,051 million (book value of NFL)

• Veq = \$56,040 million (stock price of \$29.36)

• Implied VEnt = \$59,091 million

• rEnt = [(2.539% x (3,051/59,091)] +

[7.449% x (56,040/59,091)]

• rEnt = 7.196%