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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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Presentation Transcript
agenda
Agenda
  • Background
  • Beta
  • Cost of equity
  • Cost of debt
  • WACC
background
Background
  • Restructuring
  • Billions in Impaired acquisitions
  • Layoffs
  • 5 year plan -> growth by 2015
hp swot analysis
HP SWOT Analysis

Source: OvidijusJurevicius at Strategic Management Insights

beta estimates
Beta Estimates
  • 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
beta regression results
Beta Regression Results
  • 95% confidence : 0.912 ≤ β ≤ 1.014
capm cost of equity capital
CAPM Cost of Equity Capital
  • rEq= rrf + [β*(rMkt– rrf)]
  • = 3.685% + [0.941*( 7.685% – 3.685%)]
  • 7.449% = req
cost of debt capital
Cost of Debt Capital
  • rD= Pretax borrowing rate x (1 – Tax Rate)
  • = (621/19198) x (1 – 21.46%)
  • 2.539% = rD
cost of enterprise capital
Cost of Enterprise Capital
  • 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%
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