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23 Feb In this project, you are supposed to be a financial manager working for a big corporation. You will determine the cost of debt, c

Posted at 23:13h in Business & Finance /Management by

In this project, you are supposed to be a financial manager working for a big corporation. You will determine the cost of debt, cost of preferred stock, cost of common equity, capital structure, and the weighted average cost of capital (WACC) for a publicly traded company of your choice.

University of Houston-Victoria FINC 6352- Financial Management Dr. Xavier Garza Gomez Mini Project 2

Capital Structure and Cost of Capital

1. Purpose of the project: In this project, you are supposed to be a financial manager working for a big corporation and you have to apply the knowledge obtained from the financial management (FINC6352) course. You will determine the cost of debt, cost of preferred stock, cost of common equity, capital structure, and the weighted average cost of capital (WACC) for a publicly traded company of your choice. 2. Outline for the project:

(1) Cost of capital components – Estimate the firm’s before-tax and after-tax component cost of debt; – Estimate the firm’s component cost of preferred stock; – Use three approaches (CAPM, DCF, bond-yield-plus-risk-premium) to estimate the component cost of common equity of the firm. Include your own calculation of the beta for the company. (2) Estimate Capital Structure – Estimate the firm’s weights of debt, preferred stock, and common stock using the firm’s balance sheet (book value) – Estimate the firm’s weights of debt, preferred stock, and common stock using the market value of each capital component – Calculate the firm’s weighted average cost of capital (WACC) with both structures

3. Other information regarding the project:

(1) Your project should be well-organized and typed in a Word document, but you must attach the Excel file with your report. The style and organization part of the project account for 10 percent of the grade. (2) Information obtained in this MP will be used in other mini projects so any feedback received on the calculation of WACC must be incorporated for the next Mini project.

This mini project is worth 60 points (out of 1000).

,

Compet1

Home Depot Inc (NYS: HD)
Exchange rate used is that of the Year End reported date
HD
Profitability Ratios 01/31/2021 02/02/2020 02/03/2019 01/28/2018 01/29/2017 01/31/2016 02/01/2015 02/02/2014 02/03/2013 01/29/2012 01/30/2011 01/31/2010 02/01/2009 02/03/2008 01/28/2007
ROA % (Net) 21.18 23.67 24.72 19.78 18.66 17.04 15.81 13.23 10.94 9.66 8.26 6.5 5.3 8.95 11.94
ROE % (Net) 14099.83 AvgEqty<0 AvgEqty<0 299.07 149.85 89.89 58.25 35.64 25.01 21.17 17.49 14.36 12.77 20.23 22.24
ROI % (Operating) 53.2 57.05 54.76 52.19 48.46 43.61 39.05 32.93 26.69 23.3 20.29 16.53 14.48 21.01 28.66
EBITDA Margin % 15.67 16.39 16.27 16.59 16.28 15.41 14.73 13.86 12.64 11.85 11.11 9.99 8.78 11.83 12.72
Calculated Tax Rate % 24.22 23.6 23.6 37 36.3 36.4 36.4 36.4 37.2 36.01 36.7 34.2 35.6 36.4 38.11
Revenue per Employee 262427 265884 257756 244991 233633 230551 224810 216516 216309 213258 212411 209331 222000 229904 250238
Liquidity Ratios 01/31/2021 02/02/2020 02/03/2019 01/28/2018 01/29/2017 01/31/2016 02/01/2015 02/02/2014 02/03/2013 01/29/2012 01/30/2011 01/31/2010 02/01/2009 02/03/2008 01/28/2007
Quick Ratio 0.47 0.23 0.22 0.34 0.32 0.33 0.28 0.31 0.34 0.34 0.16 0.23 0.13 0.14 0.3
Current Ratio 1.23 1.08 1.11 1.17 1.25 1.36 1.36 1.42 1.34 1.55 1.33 1.34 1.2 1.15 1.39
Net Current Assets % TA 7.52 2.8 4.12 6.15 8.36 10.5 10.1 11.18 9.52 12.7 8.37 8.65 5.37 4.44 9.7
Debt Management 01/31/2021 02/02/2020 02/03/2019 01/28/2018 01/29/2017 01/31/2016 02/01/2015 02/02/2014 02/03/2013 01/29/2012 01/30/2011 01/31/2010 02/01/2009 02/03/2008 01/28/2007
LT Debt to Equity 10.86 Equity<0 Equity<0 16.69 5.16 3.31 1.81 1.17 0.53 0.6 0.46 0.45 0.54 0.64 0.47
Total Debt to Equity 11.29 Equity<0 Equity<0 18.59 5.45 3.37 1.84 1.18 0.61 0.6 0.52 0.5 0.64 0.76 0.47
Interest Coverage 14.06 14.05 15.94 14.93 14.35 15.64 21.24 13.11 14.25 11.23 10.32 5.85 5.67 11.64 26.5
Asset Management 01/31/2021 02/02/2020 02/03/2019 01/28/2018 01/29/2017 01/31/2016 02/01/2015 02/02/2014 02/03/2013 01/29/2012 01/30/2011 01/31/2010 02/01/2009 02/03/2008 01/28/2007
Total Asset Turnover 2.17 2.32 2.4 2.31 2.22 2.15 2.07 1.94 1.8 1.75 1.68 1.62 1.67 1.58 1.88
Receivables Turnover 51.97 54.69 54.76 50.83 48.41 52.62 57.88 56.59 55.72 60.59 66.55 68.55 64.08 33.96 32.42
Inventory Turnover 5.6 5.11 5.33 5.26 5.11 5.09 4.9 4.72 4.65 4.4 4.29 4.2 4.22 4.18 5.04
Accounts Payable Turnover 13.66 14.22 14.19 14.21 13.99 14.35 14.38 14.15 14.38 14.75 14.23 13.7 13.55 11.63 13.61
Accrued Expenses Turnover 27.32 26.67 26.86 27.02 26.58 26.68 26.18 25.6 24.8 24.62 24.11 23.59 24.99 24.63 30.09
Property Plant & Equip Turnover 5.58 4.9 4.79 4.6 4.3 3.95 3.62 3.33 3.03 2.85 2.69 2.56 2.66 2.81 3.54
Cash & Equivalents Turnover 26.42 56.52 39.63 33 39.91 45.07 45.68 35.74 32.83 55.76 69.36 68.41 148.31 145.64 130.78
Per Share 01/31/2021 02/02/2020 02/03/2019 01/28/2018 01/29/2017 01/31/2016 02/01/2015 02/02/2014 02/03/2013 01/29/2012 01/30/2011 01/31/2010 02/01/2009 02/03/2008 01/28/2007
Cash Flow per Share 17.59 12.59 11.28 10.24 7.98 7.36 6.18 5.37 4.58 4.27 2.79 3.05 3.3 3.05 3.74
Book Value per Share 3.06 -2.89 -1.7 1.26 3.6 5.04 7.13 9.07 11.98 11.64 11.64 11.42 10.48 10.48 12.71

ratios company

Lowe's Companies Inc (NYS: LOW)
Exchange rate used is that of the Year End reported date
LOW
Profitability Ratios 01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007
ROA % (Net) 13.57 11.61 6.65 9.92 9.27 8.09 8.38 7.01 5.93 5.38 6.04 5.44 6.93 9.61 11.87
ROE % (Net) 343.27 152.88 48.76 56.17 43.2 28.98 24.8 17.83 12.93 10.44 10.84 9.63 12.89 17.7 20.71
ROI % (Operating) 43.48 30.78 18.86 29.35 27.11 23.94 21.99 18.36 15.16 13.2 14.62 12.93 16.19 21.98 27.17
EBITDA Margin % 11.26 10.69 7.6 10.96 11.3 10.93 11.16 10.5 10.06 9.47 10.54 10.01 11.04 12.57 13.45
Calculated Tax Rate % 24.6 23.87 31.82 37.2 40.53 42.39 36.9 37.76 37.55 36.72 37.73 36.88 37.39 37.73 37.88
Revenue per Employee 264245 226082 238350 221960 220571 219394 211945 204442 206775 199177 209184 198116 211190 224147 224076
Liquidity Ratios 01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007
Quick Ratio 0.28 0.06 0.05 0.06 0.05 0.07 0.06 0.06 0.09 0.16 0.16 0.14 0.08 0.07 0.12
Current Ratio 1.19 1.01 0.98 1.06 1 1.01 1.08 1.16 1.27 1.28 1.4 1.32 1.15 1.12 1.27
Net Current Assets % TA 7.69 0.34 -0.78 1.92 0.08 0.22 2.3 4.34 6.36 6.5 8.45 7.2 3.76 3.03 6.39
Debt Management 01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007
LT Debt to Equity 14.38 8.5 3.95 2.65 2.24 1.51 1.08 0.85 0.65 0.43 0.36 0.24 0.28 0.35 0.28
Total Debt to Equity 15.16 9.79 4.45 2.89 2.44 1.65 1.14 0.89 0.66 0.46 0.36 0.27 0.34 0.41 0.28
Interest Coverage 11.38 9.14 6.44 10.4 9.06 9.01 9.29 8.72 8.42 8.83 10.72 10.84 13.52 24.25 33.45
Asset Management 01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007
Total Asset Turnover 2.08 1.96 2.05 1.97 1.95 1.88 1.75 1.64 1.53 1.47 1.47 1.44 1.52 1.65 1.79
Receivables Turnover – – – – – – – – – – – – – – 5228.44
Inventory Turnover 4.09 3.82 4.04 4.14 4.27 4.19 4.07 3.94 3.92 3.94 3.82 3.74 4.01 4.28 4.44
Accounts Payable Turnover 9.69 9.08 9.62 10.39 10.41 11.01 11.13 11.08 11.25 11.35 11.33 11.28 12.37 13.38 14.81
Accrued Expenses Turnover 50.07 52.37 53.48 50.3 46.34 44.72 44.58 45.76 48 58.73 78.7 93.67 112.73 121.65 118.23
Property Plant & Equip Turnover 4.75 3.9 3.75 3.47 3.24 2.99 2.76 2.53 2.33 2.24 2.2 2.09 2.19 2.4 2.66
Cash & Equivalents Turnover 33.24 117.92 130.13 120.08 132.85 136.02 131.57 114.94 65.16 59.3 76.24 107.98 183.89 150.13 119.58
Per Share 01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007
Cash Flow per Share 14.81 5.54 7.66 6.05 6.28 5.17 5 3.89 3.28 3.37 2.76 2.78 2.84 2.94 2.94
Book Value per Share 1.97 2.58 4.55 7.08 7.43 8.41 10.38 11.51 12.48 13.32 13.38 13.07 12.28 11.04 10.31

Compet2

Walmart Inc (NYS: WMT)
Exchange rate used is that of the Year End reported date
WMT
Profitability Ratios 01/31/2021 01/31/2020 01/31/2019 01/31/2018 01/31/2017 01/31/2016 01/31/2015 01/31/2014 01/31/2013 01/31/2012 01/31/2011 01/31/2010 01/31/2009 01/31/2008 01/31/2007
ROA % (Net) 5.51 6.53 3.15 4.89 6.83 7.29 8.01 7.86 8.55 8.39 9.33 8.58 8.17 8.09 7.8
ROE % (Net) 17.32 20.22 8.87 12.67 17.19 18.15 20.76 21 22.96 22.45 23.53 21.08 20.58 20.18 19.67
ROI % (Operating) 17.37 15.84 17.23 16.48 17.85 18.38 20.51 20.41 21.73 21.85 22.16 21.82 20.98 20.96 21.29
EBITDA Margin % 6.07 6.4 4.72 5.56 6.74 6.95 7.46 7.49 7.72 7.75 7.86 7.63 7.27 7.47 7.46
Calculated Tax Rate % 33.35 24.43 37.36 30.42 30.27 30.31 32.2 32.87 31.01 32.56 32.2 32.35 34.19 34.2 33.56
Revenue per Employee 242445 238165 233820 217540 210672 219150 220750 216497 212673 203159 200880 194388 192618 180380 183500
Liquidity Ratios 01/31/2021 01/31/2020 01/31/2019 01/31/2018 01/31/2017 01/31/2016 01/31/2015 01/31/2014 01/31/2013 01/31/2012 01/31/2011 01/31/2010 01/31/2009 01/31/2008 01/31/2007
Quick Ratio 0.26 0.2 0.18 0.16 0.19 0.22 0.24 0.2 0.2 0.2 0.21 0.22 0.2 0.16 0.2
Current Ratio 0.97 0.79 0.8 0.76 0.86 0.93 0.97 0.88 0.83 0.88 0.89 0.87 0.88 0.81 0.9
Net Current Assets % TA -1.02 -6.76 -7.1 -9.22 -4.65 -2.19 -0.98 -3.99 -5.85 -3.79 -3.65 -4.24 -3.94 -6.65 -3.42
Debt Management 01/31/2021 01/31/2020 01/31/2019 01/31/2018 01/31/2017 01/31/2016 01/31/2015 01/31/2014 01/31/2013 01/31/2012 01/31/2011 01/31/2010 01/31/2009 01/31/2008 01/31/2007
LT Debt to Equity 0.56 0.64 0.69 0.47 0.54 0.55 0.54 0.58 0.54 0.66 0.64 0.51 0.53 0.52 0.5
Total Debt to Equity 0.6 0.73 0.8 0.6 0.59 0.62 0.62 0.74 0.71 0.75 0.73 0.58 0.65 0.69 0.63
Interest Coverage 10.28 8.53 10.31 9.38 10.04 9.77 11.56 12.13 13.47 12.3 12.75 12.71 12 12.23 13.41
Asset Management 01/31/2021 01/31/2020 01/31/2019 01/31/2018 01/31/2017 01/31/2016 01/31/2015 01/31/2014 01/31/2013 01/31/2012 01/31/2011 01/31/2010 01/31/2009 01/31/2008 01/31/2007
Total Asset Turnover 2.28 2.3 2.43 2.48 2.43 2.39 2.38 2.34 2.36 2.39 2.4 2.44 2.47 2.41 2.41
Receivables Turnover 87.13 83.39 86.48 87.4 84.57 77.75 72.19 70.85 73.65 81.07 91.38 101.43 107.02 116.66 126.74
Inventory Turnover 9.4 8.9 8.75 8.6 8.26 8.06 8.11 8.08 8.34 8.7 9.08 9 8.79 8.32 8.02
Accounts Payable Turnover 11.6 11.14 11.04 11.43 12.13 12.54 12.81 12.62 12.53 12.74 13.18 13.77 13.66 12.96 13.04
Accrued Expenses Turnover 25.49 25.41 24.85 23.64 23.24 23.93 24.32 23.36 23.2 23.42 21.66 20.99 22.72 23.53 23.1
Property Plant & Equip Turnover 5.65 5 4.85 4.65 4.45 4.3 4.23 4.15 4.19 4.16 4.12 4.24 4.33 4.23 4.32
Cash & Equivalents Turnover 40.99 60.97 71.06 73.46 62.23 54.05 59.17 63.24 65.3 64.1 55.14 53.78 62.99 58.54 50.58
Per Share 01/31/2021 01/31/2020 01/31/2019 01/31/2018 01/31/2017 01/31/2016 01/31/2015 01/31/2014 01/31/2013 01/31/2012 01/31/2011 01/31/2010 01/31/2009 01/31/2008 01/31/2007
Cash Flow per Share 12.71 8.86 9.48 9.46 10.14 8.54 8.84 7.11 7.56 7.01 6.47 6.79 5.86 5.01 4.84
Book Value per Share 28.69 26.37 25.19 26.38 25.52 25.47 25.21 23.59 23.04 20.86 19.49 18.69 16.63 16.26 14.91

Compet3

Exchange rate used is that of the Year End reported date
Profitability Ratios 12/29/2019 12/30/2018 12/31/2017 01/01/2017 01/03/2016 12/28/2014 12/29/2013 12/30/2012 01/01/2012 01/02/2011 01/03/2010 12/28/2008 12/30/2007 12/31/2006 01/01/2006
ROA % (Net)
ROE % (Net)
ROI % (Operating)
EBITDA Margin %
Calculated Tax Rate %
Revenue per Employee
Liquidity Ratios
Quick Ratio
Current Ratio
Net Current Assets % TA
Debt Management
LT Debt to Equity
Total Debt to Equity
Interest Coverage
Asset Management
Total Asset Turnover
Receivables Turnover
Inventory Turnover
Accounts Payable Turnover
Accrued Expenses Turnover
Property Plant & Equip Turnover
Cash & Equivalents Turnover
Per Share
Cash Flow per Share
Book Value per Share

asreported

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Lowe's Companies Inc (NYS: LOW)
Exchange rate used is that of the Year End reported date
As Reported Annual Balance Sheet
Report Date 01/29/2021 01/31/2020 02/01/2019 02/02/2018 02/03/2017 01/29/2016 01/30/2015 01/31/2014 02/01/2013 02/03/2012 01/28/2011 01/29/2010 01/30/2009 02/01/2008 02/02/2007
Currency USD USD USD USD USD USD USD USD USD USD USD USD USD USD USD
Audit Status Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified Not Qualified
Consolidated Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Scale Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands Thousands
Cash & cash equivalents 4690000 716000 511000 588000 558000 405000 466000 391000 541000 1014000 652000 632000 245000 281000 364000
Short-term investments 506000 160000 218000 102000 100000 307000 125000 185000 125000 286000 471000 425000 416000 249000 432000
Merchandise inventory – net 16193000 13179000 12561000 11393000 10458000 9458000 8911000 9127000 8600000 8355000 8321000 8249000 8209000 7611000 7144000
Deferred income taxes, net – – – – – – 230000 252000 217000 183000 193000 208000 166000 247000 161000
Other current assets 937000 1263000 938000 689000 884000 391000 348000 341000 301000 234000 330000 218000 215000 298000 213000
Total current assets 22326000 15318000 14228000 12772000 12000000 10561000 10080000 10296000 9784000 10072000 9967000 9732000 9251000 8686000 8314000
Land 7315000 7200000 7196000 7414000 7329000 7086000 7040000 7016000 6986000 6936000 6742000 6519000 6144000 5566000 5496000
Buildings – – – – – – – – – – – 12069000 11258000 10036000 9655000
Buildings & building improvements 18090000 17862000 18052000 18521000 18147000 17451000 17247000 17161000 16968000 16640000 16531000 – – – –
Equipment 10466000 10377000 10090000 10475000 10978000 10863000 10426000 10063000 9780000 9835000 9142000 8826000 8797000 8118000 7477000
Leasehold improvements – – – – – – – – – – – 3818000 3576000 3063000 2476000
Construction in progress 831000 506000 525000 530000 464000 513000 730000 834000 932000 921000 930000 1036000 1702000 2053000 –
Total cost 36702000 35945000 35863000 36940000 36918000 35913000 35443000 35074000 34666000 34332000 33345000 32268000 31477000 28836000 25104000
Less: accumulated depreciation 17547000 17276000 17431000 17219000 16969000 16336000 15409000 14240000 13189000 12362000 11256000 9769000 8755000 7475000 6133000
Property, less accumulated depreciation 19155000 18669000 18432000 19721000 19949000 19577000 20034000 20834000 21477000 21970000 22089000 22499000 22722000 21361000 18971000
Operating lease right-of-use assets 3832000 3891000 – – – – – – – – – – – – –
Long-term investments 200000 372000 256000 408000 366000 222000 354000 279000 271000 504000 1008000 277000 253000 509000 165000
Deferred income taxes – net 340000 216000 294000 168000 222000 241000 – – – – – – – – –
Goodwill – 303000 303000 1307000 1082000 – – – – – – – – – –
Other assets 882000 702000 995000 915000 789000 665000 1359000 1323000 1134000 1013000 635000 497000 460000 313000 317000
Total assets 46735000 39471000 34508000 35291000 34408000 31266000 31827000 3273200

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