Disney Cost of Capital
FINAN 6121 – Corporate Finance
Cost of Capital – The Walt Disney Company
Team Titans B (Doug Horne, Shaun Hoggan, James Thackeray, Jeff Burg) The purpose of this project is to determine the weighted-average cost of capital (WACC) for The Walt Disney Company. According to The Walt Disney Company’s Form 10-K filing for the fiscal year ended September 29, 2012, “The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in five business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive.” Specifically the comparison between debt and equity will be summarized using the WACC for The Walt Disney Company as a whole rather than an individual focus on a vertical segment. The analyses of individual segments while interesting, do not provide the overarching inspection of the company’s management of equity and debt levels.
Identified below in Figure 1, are the WACC calculations as of the most recent fiscal year end (Sept. 29, 2012) and the subsequent 10-Q report (Dec. 29, 2012). Notice the extreme change in the level of debt and the effective tax rate as identified in yellow. This comparison shows an 18% increase in the level of debt and a 14% decrease in the effective tax rate. As a result of taking on more debt, the increased interest payments create an underlying favorable tax shield. Figure 1: | |
Equity – The Equity of The Walt Disney Company was found by multiplying the number of shares outstanding as of the given reporting periods (1.78 billion and 1.81 billion, respectively), by the closing share price ($52.28 and $49.15). The shares outstanding were obtained from the company’s 10-K and most recent 10-Q. The share prices were found in the 10-K for the fiscal year and Yahoo finance for December 29, 2012.
Debt – The Debt was obtained from the “Borrowings” heading of both the 10-K and the 10-Q. The figures were given as totals,
Cost of Capital – The Walt Disney Company
Team Titans B (Doug Horne, Shaun Hoggan, James Thackeray, Jeff Burg) The purpose of this project is to determine the weighted-average cost of capital (WACC) for The Walt Disney Company. According to The Walt Disney Company’s Form 10-K filing for the fiscal year ended September 29, 2012, “The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in five business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive.” Specifically the comparison between debt and equity will be summarized using the WACC for The Walt Disney Company as a whole rather than an individual focus on a vertical segment. The analyses of individual segments while interesting, do not provide the overarching inspection of the company’s management of equity and debt levels.
Identified below in Figure 1, are the WACC calculations as of the most recent fiscal year end (Sept. 29, 2012) and the subsequent 10-Q report (Dec. 29, 2012). Notice the extreme change in the level of debt and the effective tax rate as identified in yellow. This comparison shows an 18% increase in the level of debt and a 14% decrease in the effective tax rate. As a result of taking on more debt, the increased interest payments create an underlying favorable tax shield. Figure 1: | |
Equity – The Equity of The Walt Disney Company was found by multiplying the number of shares outstanding as of the given reporting periods (1.78 billion and 1.81 billion, respectively), by the closing share price ($52.28 and $49.15). The shares outstanding were obtained from the company’s 10-K and most recent 10-Q. The share prices were found in the 10-K for the fiscal year and Yahoo finance for December 29, 2012.
Debt – The Debt was obtained from the “Borrowings” heading of both the 10-K and the 10-Q. The figures were given as totals,