Financial

Case

You work in Walt Disney Company’s corporate finance and treasury department and have just been assigned to the team estimating Disney’s WACC. You must estimate this WACC in preparation for a team meeting later today. You quickly realize that the information you need is readily available online.

1. Go to http://finance.yahoo.com. Under “Market Summary,” you will find the yield

to maturity for ten-year Treasury bonds listed as “10 Yr Bond(%).” Collect this

number as your risk-free rate.

2. In the box next to the “Get Quotes” button, type Walt Disney’s ticker symbol (DIS),

and click Search. Once you see the basic information for Disney, find and click “Key Statistics” on the left side of the screen. From the key statistics, collect Disney’s market capitalization (its market value of equity), enterprise value cash, and beta.

3. To get Disney’s cost of debt and the market value of its long-term debt, you will need the price and yield to maturity on the firm’s existing long-term bonds. Go to http://www.finra.org, click on Investors and then under “Market Data,” click on Bonds. Under “Quick Bond Search,” click “Corporate,” type Disney’s ticker symbol (DIS), and click Search. A list of Disney’s outstanding bond issues will appear.

Assume that Disney’s policy is to use the yield to maturity on non-callable ten-year

obligations as its cost of debt. Find the non-callable bond issue that is as close to

ten years from maturity as possible. (Hint: You will see a column titled “Callable”;

make sure the issue you choose has “No” in this column.) You may have to choose

a bond issued by one of its subsidiaries, like ABC. Find the yield to maturity for

your chosen bond issue (it is in the column titled “Yield”) and enter that yield as

your pre-tax cost of debt into your spreadsheet. Next, copy and paste the data in

the entire table into Excel.

4. You now have the price for each bond issue, but you need to know the size of the

issue. Returning to the Web page, go...