Apply weighted average cost of capital (WACC) into a real company. Choose a company and compute...
Apply weighted average cost of capital (WACC) into a real company. Choose a company and compute its WACC. Use the historical risk-free rate of 3.4% and the market return of 12.1%. please show work.
Homework Answers
For Alphabet (GOOG),
From Yahoo Finance, Beta = 1.01
Using CAPM, Cost of equity (re) = Rf + beta x (Rm - Rf) = 3.4% + 1.01 x (12.1% - 3.4%) = 12.19%
Now, as Alphabet is a debt free company, WACC is equal to cost of equity.
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