Firm Financial Analysis Project Segment 3 Parts 5 Macy’s Inc
For the third segment of the Firm’s Financial Analysis Project, use the company that you selected in Segment MACY’S 1 to determine the Weighted Average Cost of Capital. Using the principles and tools outlined in the textbook, form an estimate of the WACC for the firm. In order to complete this task, you will need to do the following:
- Determine the cost of debt: Using information from the firm’s website, annual report, and the Stafford Library’s database sources, determine the ‘average’ rating of your firm’s bonds and the current YTM on a composite of these bonds. Based on this information, estimate the current cost of debt for the firm. Explain the approach and procedure you used to make your determination and what this number means.
- Determine the cost of equity: Determine the required rate of return for your firm using the CAPM. Explain the approach and procedure you used (and justification for the sources of inputs used for your model) to make your determination and the meaning of this required rate of return.
- Determine the capital structure of the firm: Determine the market value of the firm’s debt and equity. Explain the approach and procedure you used and use these values to determine the weights for the WACC.
- Provide an overall explanation for your results and how the firm may use this WACC.
- Don’t forget your paper conclusion.
Calculations may be submitted on a separate Excel spreadsheet, with your explanations written in your paper.
TEXT BOOK : Berk, J., & DeMarzo, P. (2019). Corporate Finance (5th ed.). Pearson Education (US). (Mandatory) and other references
