Calculation of Cost of Capital for a Foreign Company
Instructions: Pick any of the globally publicly listed companies (NOT in USA and NOT in UAE, DO NOT PICK A FINANCIAL INSTITUTION) and in a group of 3 to 5 members, compute the company’s overall weighted average cost of capital (WACC) that can be used to evaluate a project that has a life of 10 yrs. Write up your analysis (should not exceed 4 pages) adhering to the following steps:
Useful Data Sources:
– To get the US treasury bills and bonds rates go to : www.ustreas.gov
– To get the company’s financial information, visit the company’s website (try to find an investor relations section), or get the info from the financial market’s website (for example LSE if it was London Stock Exchange etc..), you will need the most recent stock price data as well.
– To get the country’s risk premium, go to Damodaran’s website ( http://damodaran.com ), go to data, current data, risk premiums for other markets. You can also use this website for Betas if you couldn’t find your company’s beta online.
Notice that there is no “one” or “correct” answer for your WACC. However, the “ideal” solution/analysis is the one that clearly explains any assumptions and sources of information used , clearly lists the steps used to compute the WACC, and finally mentions any possible limitations in the WACC that they have computed.
Notice that this should be a result of your individual work & since you need to use the most recent stock price & data, it should be hard to copy such info from other sources (e.g. use an existing online case). However, I will also run the assignments through Safe Assign, and if I detect any case of Plagiarism (buying the case etc.) the team will get a “F” grade for this assignment and will be forwarded for college for investigation. Exchanging information across the two sections is also prohibited and will also result in “F” grade.
 Ignore flotation costs
 If you cannot find the yield to maturity on debt for this company, you can use the company’s interest rate on any outstanding loans as an estimation of the cost of borrowing.
 You can assume that the market value of debt equals the book value of debt. (Notice here that you need to use long term debt only).