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.)


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