The followings are the instructions for this case. Provide the excel file where the computations are done. GIVE ANSWERS PLEASE. I WILL UPVOTE! You have to use the following equation: WACC = Wd*Rd*(1-t)+We*Re. Where WACC stands for the Weighed average cost of capital, Wd is the weight of debt in the capital could be either market value weight or book value weight and it is calculated in the following way: Wd=D/(E+D), where D is either the book value of debt or the market value of debt, E is the book value of equity or the market value of equity. So keep in mind if you want Wd on book value basis, then both E and D must be on book value basis, if you want Wd on a market value basis, then both E and D must be on market value basis. Rd is the cost of debt (percentage cost of debt), t is the tax rate, We is the weight of equity in the capital could be either market value weight or book value weight, We = E/(E+D), as I explained Wd, it could be either on a book value or book value basis. Re is the cost of equity. Q1: you have to go the following website: www.finance.yahoo.com, and type “SNA” to search for “Snap-On Tools “financial and stock information. Then, click on financials tab and then select the balance sheet tab and you have to get book value of equity and the book value of debt as of 12/31/2023, from the balance sheet, the book value of debt would be what is called “Total Non Current Liabilities” after you click on “Total Liabilities Net Minority Int”, and book value of equity would be what is called the “Stockholders' Equity”, after you click on “Total Equity Gross Minority Inte”. This is question one, very simple, you need to show me those two values: BV of equity and the BV of debt. Q2: you have to show me the most recent Snap-On Tools (ticker symbol: SNA) stock price (specify the date), and then give the market value of equity (called Market Cap) and the Beta for SNA. (again, go to finance.yahoo.com, and type in SNA to get the information you need). Also, you need to get the number of share outstanding, by typing in SNA and click on statistics tab and look for the number of shares outstanding under share statistics. Now, you have to calculate the cost of equity which is Re using the CAPM and using the dividend discount model. Using the CAPM, the cost of equity is : Re= Rf + Beta * Market risk premium, use 7% for the market risk premium. Then, to get Rf, you have to use again, the finance.yahoo.com site, and point to the markets tab, and then select US treasury bond rates tab, and Rf in this case, is the rate on the 13 Week Treasury Bill (given to you as a percentage). After you get all the information, simply use the CAPM to get Re. To get another estimate of Re, you have to use the DDM: Re=(D1/Po) + g, g is given to you, Po is the current stock price, D1 is the forward annual dividend paid by SNA from finance.yahoo.com. After you have two cost of equity, then what your estimate for Re? Q3: you have to look for SNA competitors by searching the web using any finance website (in this case a total of 5 U.S. and/or foreign companies). Now, using any finance website (you can still use finance.yahoo.com), and find the beta for each company, and then calculate the average beta here (industry beta) , then use the CAPM again, to calculate Re but in this case, you have to use the industry beta as opposed to using SNA beta in question 2. Does it matter if you use the beta for SNA or the beta for the industry in this case?
The followings are the instructions for this case. Provide the excel file where the computations are done. GIVE ANSWERS PLEASE. I WILL UPVOTE!
You have to use the following equation: WACC = Wd*Rd*(1-t)+We*Re. Where WACC stands for the Weighed average cost of capital, Wd is the weight of debt in the capital could be either market value weight or book value weight and it is calculated in the following way: Wd=D/(E+D), where D is either the book value of debt or the market value of debt, E is the book value of equity or the market value of equity. So keep in mind if you want Wd on book value basis, then both E and D must be on book value basis, if you want Wd on a market value basis, then both E and D must be on market value basis. Rd is the cost of debt (percentage cost of debt), t is the tax rate, We is the weight of equity in the capital could be either market value weight or book value weight, We = E/(E+D), as I explained Wd, it could be either on a book value or book value basis. Re is the
Q1: you have to go the following website: www.finance.yahoo.com, and type “SNA” to search for “Snap-On Tools “financial and stock information. Then, click on financials tab and then select the balance sheet tab and you have to get book value of equity and the book value of debt as of 12/31/2023, from the balance sheet, the book value of debt would be what is called “Total Non Current Liabilities” after you click on “Total Liabilities Net Minority Int”, and book value of equity would be what is called the “
Q2: you have to show me the most recent Snap-On Tools (ticker symbol: SNA) stock price (specify the date), and then give the market value of equity (called Market Cap) and the Beta for SNA. (again, go to finance.yahoo.com, and type in SNA to get the information you need). Also, you need to get the number of share outstanding, by typing in SNA and click on statistics tab and look for the number of shares outstanding under share statistics. Now, you have to calculate the cost of equity which is Re using the CAPM and using the
Q3: you have to look for SNA competitors by searching the web using any finance website (in this case a total of 5 U.S. and/or foreign companies). Now, using any finance website (you can still use finance.yahoo.com), and find the beta for each company, and then calculate the average beta here (industry beta) , then use the CAPM again, to calculate Re but in this case, you have to use the industry beta as opposed to using SNA beta in question 2. Does it matter if you use the beta for SNA or the beta for the industry in this case?
Step by step
Solved in 1 steps
