For the Lam Research Group, please look at their long term sources of financing and calculate their weighted average cost of capital (WACC) in an excel spreadsheet.
Specific Instructions:
WACC (Excel worksheet). Please add to your final project spreadsheet started in Phase I. Calculate your cost of debt using techniques such as YTM for traded bonds and Z-score (please remember that the z-score calculation is NOT the cost of debt itself – see lecture slides). Calculate cost of equity using CAPM and the Dividend Growth Model (if your firm pays dividends. Calculate cost of preferred stock (if any) using the perpetuity formula. Combine these component costs using the WACC formula. Calculate the company’s ONE terminal value calculation (this will be its own Excel workbook). Terminal value is the calculated value of the company from year 6 to infinity, then this value is discounted to the present from year five.
IMPORTANT: All components of the WACC must be documented. If you calculate it, you must show the calculation and the source of the data you are using. If a number comes from an outside source, then you must document where you got it, including a web link to the source.
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