FNBSLW 344 Business Finance
In this project, you will take the role of a junior analyst for the prestigious Warhawk Consulting Group. Your task is to select one of the companies from those which asked for coverage and present to them a report outlining their current market capital positions, cost of financing sources, and weighted average cost of capital (WACC). While these items are tracked within the company, they are hiring us as a consulting group to verify their internal numbers and estimates. Therefore, it very important to show all computational steps for verification and reproducibility. The management teams at the companies are also concerned about the assumptions their internal financing teams are using in calculation of these numbers. Thus, it is of utmost importance that the report discusses all assumptions used in calculation of the WACC, these include, but are not limited to, the market risk premium (MRP), tax rate paid, Beta (β), and firm growth rate.
One to two page single-spaced report summarizing the findings on the selected company’s WACC, addressing the concerns in the project overview.
An Excel file or neatly hand written and scanned copy of the calculations used in computation of the firm’s WACC.
The project should estimate the cost of equity using both the Capital Asset Pricing Model (CAPM) and Gordon Growth Model. An explanation should be provided as to how the cost of equity was arrived. If the firm does not pay a dividend, use the “risk-premium” approach.
The write-up should not contain much “fluff” or “filler”. The write-up should conclude with a “summation” paragraph highlighting your findings and restate the calculated WACC of the firm. If you have any suggestions or implications based on your calculations they should also go in this final paragraph.
The write-up should not be used to write out in words the steps you used to perform the actual calculation. Instead the report should be used to highlight the assumptions used in selection of the data, and how the assumptions may impact the calculated results.
Your grade will not be impacted by how “correct” are your assumptions, but rather by how defensible are the assumptions, and if the student displays some critical thinking as it relates to finance and financial theory. After the list of firms are several reference and links that may be used to aid the student in completion of this project.