Market Cap = 5.65B Long term debt = 748,000 Beta for 5 years monthly =0.27 Avg. volume 5,869,739 Income before tax 417,000 Income tax expense 129,000 calculate the weighted average cost of capital (WACC) of Sainsbury.Discuss the Beta of Sainsbury as measure of systematic risk. Discuss the 10-year Bond rate of UK government as proxy of risk-free rate. What is the weighted average cost of capital (WACC) of Sainsbury? (Hint:according to IG market, the average of recent yearly returns of FTSE100 as proxy of UK market is 7.5%; UK corporate tax rate is19%).
Cost of Capital
Shareholders and investors who invest into the capital of the firm desire to have a suitable return on their investment funding. The cost of capital reflects what shareholders expect. It is a discount rate for converting expected cash flow into present cash flow.
Capital Structure
Capital structure is the combination of debt and equity employed by an organization in order to take care of its operations. It is an important concept in corporate finance and is expressed in the form of a debt-equity ratio.
Weighted Average Cost of Capital
The Weighted Average Cost of Capital is a tool used for calculating the cost of capital for a firm wherein proportional weightage is assigned to each category of capital. It can also be defined as the average amount that a firm needs to pay its stakeholders and for its security to finance the assets. The most commonly used sources of capital include common stocks, bonds, long-term debts, etc. The increase in weighted average cost of capital is an indicator of a decrease in the valuation of a firm and an increase in its risk.
Market Cap = 5.65B
Long term debt = 748,000
Beta for 5 years monthly =0.27
Avg. volume 5,869,739
Income before tax 417,000
Income tax expense 129,000
calculate the weighted average cost of capital (WACC) of Sainsbury.Discuss the Beta of Sainsbury as measure of systematic risk. Discuss the 10-year Bond rate of UK government as proxy of risk-free rate. What is the weighted average cost of capital (WACC) of Sainsbury? (Hint:according to IG market, the average of recent yearly returns of FTSE100 as proxy of UK market is 7.5%; UK corporate tax rate is19%).
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