Disney Yield Curves and WACC

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Description 1.Calculate liquidity and capital structure ratios 2.Calculate Disney’s weighted average cost of capital (WACC) using the data provided in this case for the first quarter of 2018. (Bloomberg includes more elements in the WACC calculation than the textbook does, so for our purposes let’s use the textbook formula with the data points from Bloomberg.) 3.Use the Bloomberg Terminal to gather the necessary data to make a similar calculation for the third quarter of 2018. 4.Using the WACC Comparisons tab on the accompanying spreadsheet, calculate the WACC of each Disney segment comparable. Describe the primary WACC drivers that explain the differences between the WACC of Disney and its comparables. 5.In the WACC Sensitivity tab on the accompanying spreadsheet, alter the cells as described to see how changes to WACC’s inputs impact the WACC. Write a few sentences describing each change: •an increase in the Federal Reserve reference rate •a two notchdowngrade in Disney’s credit rating •adding debt to Disney’s capital structure for an acquisition •a downturn in the U.S. equity market •an increase in Disney’s marginal income tax rate

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