WACC for The Walt Disney Company Cost of debt: The Walt Disney Company has medium term

non-callable bond that matures on 03/01/2032. This bond pays coupon rate of 7%. (http://cxa.gtm.idmanagedsolutions.com/finra/BondCenter/SearchResult.as px?q=DIS) To determine the tax rate, from income statement we divide Tax Expense by Income Before Taxes. Tax rate = 3,087,000/9,260,000 and we get approximately 33%. (http://finance.yahoo.com/q/is?s=DIS+Income+Statement&annual) Cost of equity CAPM approach: To determine the risk free rate we will use 10-year Treasury bond yield, which is 1.75%. (http://finance.yahoo.com/bonds/composite_bond_rates) Market risk premium when we subtract risk free rate from the average return on the market. We will use 10-average return on S&P 500 Index, which is 7.88%. (http://quicktake.morningstar.com/index/IndexCharts.aspx?Symbol=SPX) Market risk premium = 7.88% - 1.75% = 6.13%. According to Yahoo Finance, The Walt Disney Company has a beta of 1.09. (http://finance.yahoo.com/q?s=DIS) The cost of equity is found according to the following formula: r= rf+ beta ( rm-rf) r= 1.75% + 1.09 x (6.13%) = 8.43% Cost of preferred stock The Walt Disney Company does not offer preferred stock. Capital structure of the firm Market value of the debt= LTD+STD- CASH=10,697,000,000 + 3,614,000,000 3, 387,000,000 = $10,924,000,000 The market value for equity = #shares x current stock price= 1,810,000,000 x $62.84 = $113,740,400,000

The percentage for debt should be= D/ D+E= 10,924,000,000/124,664,400,000 = 8.76% The percentage for equity should be= E/D+E= 113,740,400,000/9124,664,400,000 = 91,24% The WACC= (Wd) rd (1-T) + Ws rs+ Wps rps WACC= 8.76% X 7% X (1 -33%) + 91.24% X 8.43 %= 8.10% The Walt Disney Company has a WACC of 8,10%. The firm can use WACC when valuing and selecting investments. In discounted cash flow analysis, for instance, WACC is used as the discount rate applied to future cash flows for deriving a business's net present value. WACC can be used as a hurdle rate against which to assess ROIC performance. It also plays a key role in economic value added (EVA) calculations.