Microsoft Word - FINC423_GHW_10_Recap_WACC
FINC 423
Advanced Corporate Finance
Spring 2021
Estimation of WACC for the
Recapitalized Firm
Group Homework #10
You are to make an estimate of the WACC for your assigned firm if it executes the proposed
ecapitalization. I provide a model for this work for Pfizer in Handout #27. You will clearly need
the data you used for the original estimate of WACC in Group Homework #5. Most of the new
figures that you will need are from Group Homeworks #7 and #8 where you estimate the revised
market value balance sheet, as well as of beta and the cost of equity capital. You will also need
the estimates for the rate on the firm’s existing and new debt following the recapitalization from
Group Homework #9. Clearly, you should clean-up any problems with your estimates from these
assignments before proceeding.
Provide a summary of the work on the cu
ent WACC (following Group Homework #5) as well
as the estimate of WACC at the new capital structure. For both of these calculations you must
decide whether the firm’s short-term debt is substantial enough to merit inclusion in the
calculation.
Provide supporting data on the price of the firm’s stock and shares outstanding. Also, provide the
Excel spreadsheet showing your estimate of the market value and weighted-average yield-to-
maturity of the firm’s cu
ent long-term debt. Finally, provide information on the cu
ent and
elevered balance sheets.
Post your Excel files and other supporting material to the Drop-Box in Canvas. I presume that
there will be several sheets of supporting documentation, probably in various formats. For this
assignment, I am not too concerned with style of presentation.
Provide some sensible title for your files. Include the Group name (for instance,
Pfizer-FINC423-01-GHW-10).