Finance Assignment Weighted Average Cost of Capital

Running Head: FINANCE
Finance
Name of the Student:
Name of the University:
Authors Note

FINANCE1
Table of Contents
Stage 1:............................................................................................................................................2
Stage 2:............................................................................................................................................9
Stage 3:..........................................................................................................................................17
References:....................................................................................................................................22

FINANCE2
Stage 1:
In order to compute the weighted average cost of capital of GlaxoSmithKline Plc. it is
essential to have necessary information about the financial structure and associated cost of
different sources which have contributed to the overall financing of the company. Accordingly,
the compiled financial information containing assets, liabilities, revenue, expenditures and cash
flows of the company are provided below on the basis of which the computation of weighted
average cost of capital of the company shall be made.
GLAXOSMITHKLINE PLC ADR (GSK) Balance Sheet
All amounts are
in GBP millions
except per share
data. 2012-12 2013-12 2014-12 2015-12 2016-12
Assets
Current assets
Cash
Cash and cash
equivalents 4,184.00 5,534.00 4,338.00 5,830.00 4,897.00
Short-term
investments 81.00 66.00 69.00 75.00 89.00
Receivables 4,115.00 3,966.00 3,556.00 3,824.00 4,615.00
Inventories 3,969.00 3,900.00 4,231.00 4,716.00 5,102.00
Prepaid expenses 285.00 290.00 289.00 307.00 335.00
Other current
assets 1,058.00 1,471.00 2,195.00 1,835.00 1,673.00
Total current
assets 13,692.00 15,227.00 14,678.00 16,587.00 16,711.00
Non-current
assets
Property, plant and
equipment
Gross property,
plant and
equipment 18,742.00 18,853.00 19,355.00 20,750.00 22,164.00
Accumulated
Depreciation (9,966.00) (9,981.00) (10,303.00) (11,082.00) (11,356.00)

FINANCE3
Net property,
plant and
equipment 8,776.00 8,872.00 9,052.00 9,668.00 10,808.00
Equity and other
investments 1,366.00 1,525.00 1,454.00 1,462.00 1,248.00
Goodwill 4,359.00 4,205.00 3,724.00 5,162.00 5,965.00
Intangible assets 10,161.00 9,283.00 8,320.00 16,672.00 18,776.00
Deferred income
taxes 2,385.00 2,084.00 2,688.00 2,905.00 4,374.00
Prepaid pension
benefit 93.00
Other long-term
assets 736.00 890.00 642.00 990.00 1,199.00
Total non-current
assets 27,783.00 26,859.00 25,973.00 36,859.00 42,370.00
Total assets 41,475.00 42,086.00 40,651.00 53,446.00 59,081.00
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 3,631.00 2,789.00 2,943.00 1,308.00 4,129.00
Accounts payable 2,666.00 2,739.00 2,790.00 3,120.00 3,596.00
Taxes payable 1,374.00 1,452.00 945.00 1,421.00 1,305.00
Accrued liabilities 4,233.00 2,797.00 4,609.00 5,206.00 6,324.00
Deferred revenues 162.00 167.00 62.00 73.00 158.00
Other current
liabilities 1,749.00 3,733.00 1,946.00 2,289.00 3,489.00
Total current
liabilities 13,815.00 13,677.00 13,295.00 13,417.00 19,001.00
Non-current
liabilities
Long-term debt 14,671.00 15,456.00 15,841.00 15,324.00 14,661.00
Deferred taxes
liabilities 1,004.00 693.00 445.00 1,522.00 1,934.00
Deferred revenues 64.00 66.00
Pensions and other
benefits 3,105.00 2,189.00 3,179.00 3,229.00 4,090.00

FINANCE4
Minority interest 937.00 815.00 673.00 3,764.00 3,839.00
Other long-term
liabilities 2,133.00 2,259.00 2,955.00 11,012.00 14,366.00
Total non-current
liabilities 21,850.00 21,412.00 23,093.00 34,915.00 38,956.00
Total liabilities 35,665.00 35,089.00 36,388.00 48,332.00 57,957.00
Stockholders'
equity
Common stock 1,349.00 1,336.00 1,339.00 1,340.00 1,342.00
Additional paid-in
capital 2,022.00 2,595.00 2,759.00 2,831.00 2,954.00
Retained earnings 652.00 913.00 (2,074.00) (1,397.00) (5,392.00)
Accumulated other
comprehensive
income 1,787.00 2,153.00 2,239.00 2,340.00 2,220.00
Total
stockholders'
equity 5,810.00 6,997.00 4,263.00 5,114.00 1,124.00
Total liabilities
and stockholders'
equity 41,475.00 42,086.00 40,651.00 53,446.00 59,081.00
All amounts are in GBP millions except
per share data. 2012-12 2013-12 2014-12 2015-12 2016-12
Revenue 26,431.00 26,505.00 23,006.00 23,923.00 27,889.00
Less: Cost of revenue 7,894.00 8,585.00 7,323.00 8,853.00 9,290.00
Gross profit 18,537.00 17,920.00 15,683.00 15,070.00 18,599.00
Operating expenses
Research and development 3,968.00 3,923.00 3,450.00 3,560.00 3,628.00
Sales, General and administrative 8,739.00 8,480.00 8,246.00 9,232.00 9,366.00
Other operating expenses (1,562.00) (1,511.00) 390.00 (8,044.00) 3,007.00
Total operating expenses 11,145.00 10,892.00 12,086.00 4,748.00 16,001.00

FINANCE5
Operating income 7,392.00 7,028.00 3,597.00 10,322.00 2,598.00
Add: Other income 108.00 345.00 59.00 923.00 42.00
Earnings Before Interest and Tax (EBIT) 7,500.00 7,373.00 3,656.00 11,245.00 2,640.00
Less: Interest Expense 808.00 726.00 688.00 719.00 701.00
Earnings Before Tax (EBT) 6,692.00 6,647.00 2,968.00 10,526.00 1,939.00
Provision for income taxes 1,948.00 1,019.00 137.00 2,154.00 877.00
Net profit from continuing operations 4,744.00 5,628.00 2,831.00 8,372.00 1,062.00
Other (179.00) (192.00) (75.00) 50.00 (150.00)
Net income available to common
shareholders 4,565.00 5,436.00 2,756.00 8,422.00 912.00
Earnings per share
Basic 1.86 2.25 1.14 3.49 0.38
Diluted 1.83 2.21 1.13 3.45 0.37
Weighted average shares outstanding
Basic 2,456.00 2,416.00 2,404.00 2,416.00 2,430.00
Diluted 2,494.00 2,460.00 2,432.00 2,444.00 2,454.00
EBITDA 8,945.00 8,787.00 5,140.00 12,875.00 4,414.00
(Alin-Eliodor 2014)
The operating revenue of the company with each passing year has reduced which is a
very concerning fact for any organization. Especially for a firm in pharmaceutical industry
decrease in amount of revenue is a very serious issue because of the ever increasing
pharmaceutical market around the globe. The revenue from business of the company has shown
little turn of fortune with increase in the year 2016 is a positive on which the management should