30 Dec For your next post, review
WEEK 4: CALCULATING CAPM AND WACC FOR A REAL FIRM
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Our discussion topic concerns the calculation of stock values using the Capital Asset Pricing Model (CAPM). Explain the CAPM model. The textbook provides a list of betas for a selection of stocks. Choose two firms from that list and discuss whether the betas are what you would expect. Be sure to explain why or why not. Calculate the returns based on the CAPM model. Be sure to state your assumptions.
For your second post, the Weighted Average Cost of Capital (WACC) for a firm can be calculated or found through research. Select two firms in the same industry. The industry may be that in which you currently work or it may be an industry in which you are interested. Calculate or find the WACC for the two firms. How do the WACCs compare? Are the WACCs what you would expect? What causes the differences between the two firms’ WACCs?
For your next post, review the findings of another student. Explain in detail why the CAPM or the WACC for these firms differ from each other. If you were the Stock Analyst, what would be your recommendations?
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