Question

You have been hired as a junior analyst to do a valuation of Adidas. Your boss...

You have been hired as a junior analyst to do a valuation of Adidas. Your boss wants you to calculate the WACC. You have the following information to calculate the WACC.

The current share price of the company is €169 per share and the total number of shares outstanding is 209 million. Analysists’ consensus target price for Adidas is €173.

The company has issued bonds that have a book value of €1,500 million on the balance sheet and a market value of €2,300 million. Bonds that are comparable to those issued by Adidas are offering a YTM of 2.25%.

Adidas shares are quoted on the German stock market where the market risk premium is estimated to be 5.08%. You can assume a risk-free rate of is 1.5% and an equity beta of Adidas equal to 0.81. Finally, the company tax rate is 30%.

Given this information, what is your estimate of the WACC of Adidas? (Please, illustrate any intermediate step that you follow to reach the final answer.)


Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You have just been hired as a financial analyst for The Kroger Co. (KR). Your boss...
You have just been hired as a financial analyst for The Kroger Co. (KR). Your boss has asked you to work on the project for The Kroger Co. (KR) to acquire Sprouts Farmers Market, Inc. (SFM). Upper management believes that this company would be a good complement to Kroger’s current operations. Discuss concepts that would help you determine whether or not Sprouts Farmers Market, Inc. (SFM) should be acquired by The Kroger Co. (KR). Make sure to discuss all aspects...
You have been hired as a consultant by Aerospace Exploration, Inc.   (AEI).    AEI is publically traded...
You have been hired as a consultant by Aerospace Exploration, Inc.   (AEI).    AEI is publically traded company and a leader in space travel.   The company is looking to setup an outpost on the moon, where visitors can experience space living over a 2 week visit (including travel time).    AEI owns land which has a book value of $7.3 million and a market value of $7.5 million.   The following market data is available: Debt: 260,000; 6.1% semi-annual coupon bonds outstanding with...
You have just been hired as a financial analyst for The Kroger Co. (KR). Your boss...
You have just been hired as a financial analyst for The Kroger Co. (KR). Your boss has asked you to work on the project for The Kroger Co. (KR) to acquire Sprouts Farmers Market, Inc. (SFM). Upper management believes that this company would be a good complement to Kroger’s current operations. Discuss the concepts that were learned in this course to make a determination as to whether or not Sprouts Farmers Market, Inc. (SFM) should be acquired by The Kroger...
You have been given the task of calculating the WACC of ABC Inc. You will use...
You have been given the task of calculating the WACC of ABC Inc. You will use the following information to calculate the WACC. The firm has 3000 coupon paying bonds outstanding. Each coupon-paying bond has a face value of $1000, will mature 10 years from today, and is currently priced at 130% of the face value. The annual coupon rate is 12%, and coupon is paid on an annual basis. The company has 500,000 common shares outstanding, and each share...
You have been given the task of calculating the WACC of ABC Inc. You will use...
You have been given the task of calculating the WACC of ABC Inc. You will use the following information to calculate the WACC. The firm has 3000 coupon paying bonds outstanding. Each coupon-paying bond has a face value of $1000, will mature 10 years from today, and is currently priced at 130% of the face value. The annual coupon rate is 12%, and coupon is paid on an annual basis. The company has 500,000 common shares outstanding, and each share...
You have been given the task of calculating the WACC of ABC Inc. You will use...
You have been given the task of calculating the WACC of ABC Inc. You will use the following information to calculate the WACC. The firm has 3000 coupon paying bonds outstanding. Each coupon-paying bond has a face value of $1000, will mature 10 years from today, and is currently priced at 130% of the face value. The annual coupon rate is 12%, and coupon is paid on an annual basis. The company has 500,000 common shares outstanding, and each share...
6. Suppose you have been hired as a financial consultant by Defence Electronics Ltd (DEL), a...
6. Suppose you have been hired as a financial consultant by Defence Electronics Ltd (DEL), a large publicly traded firm that is the market-share leader in radar detection systems (RDSs). The company is considering setting up a manufacturing plant overseas to produce a new line of RDSs. This will be a five-year project. The company bought some land three years ago, If the land were sold today, the net proceeds would be $3.9 million after taxes. In five years, the...
Daves Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained...
Daves Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained the following information. (1) The firm's bonds have a YTM of 6%. (2) The company’s tax rate is 30%. (3) The risk-free rate is 4%, the market risk premium is 5%, and the stock’s beta is 1.10. (4) The target capital structure consists of 30% debt and the balance is common equity. The firm uses the CAPM to estimate the cost of common stock,...
Assume you have just been hired as a business manager of Pamela’s Pizza, a regional pizza...
Assume you have just been hired as a business manager of Pamela’s Pizza, a regional pizza restaurant chain. The firm is currently financed with all equity and it has 15 million shares outstanding. When you took your corporate finance course, your instructor stated that most firm’s owners would be financially better off if the firms used some        debt. When you suggested this to your new boss, he encouraged you to pursue the idea. As a first step, assume that...
Daves Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained...
Daves Inc. recently hired you as a consultant to estimate the company’s WACC. You have obtained the following information. (1) The firm's bonds have a YTM of 6%. (2) The company’s tax rate is 30%. (3) The risk-free rate is 4%, the market risk premium is 5%, and the stock’s beta is 1.10. (4) The target capital structure consists of 30% debt and the balance is common equity. The firm uses the CAPM to estimate the cost of common stock,...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT