WACC Project: Procter & Gamble

This finance project requires a comprehensive analysis of Procter & Gamble's Weighted Average Cost of Capital (WACC) using data from its 2015 10-K report. The assignment involves calculating the firm's cost of debt, cost of equity (using CAPM), and determining the optimal capital structure that minimizes WACC. Students must extract relevant financial data from the 10-K, including long-term debt, equity, tax rates, and beta. They then calculate the unlevered and levered betas at different capital structures. Further steps involve calculating free cash flow (FCF), using a zero-growth valuation model to determine firm value at the optimal capital structure, and estimating the intrinsic stock price. Finally, students compare the calculated intrinsic price with the market price and provide a recommendation on the stock, supported by stock chart and analyst information. The project emphasizes using specific equations and figures from a provided textbook.

The company: "Procter and Gamble Company” this is a real world example, so you
need to show where you got the numbers from
Using the 2015 balance sheet and 10k report find the following:
WACC Project Checklist:
1. Determine the firm’s rd from the 10-K report in the Note to the Long-term
Debt, where rd = ∑(wdi*rdi), where wdi = the weight of debt for each bond and
rdi is the coupon rate for each bond. Please regard equation 6.6 on page 247
for a review of the methodology.
2. Construct the capital structure of the firm to find the wd and we components of
the WACC. Note that the dollar amount of long-term debt and the dollar
amount of total equity should be utilized. Preferred equity dollar amount
should be included in the calculation if the firm still has preferred equity
outstanding.
3. Find the firm’s beta.
4. Determine the firm’s tax rate from the 10-K information. Please make sure to
include the page number where you determined the firm’s tax rate in the 10-K
report from the previous fiscal year.
5. Find either the 1-year Treasury bill rate or the 10-year Treasury note rate at the
close of the firm’s fiscal year. If the risk-free rate is provided by the firm in the
10-K, please utilize this percentage. Full credit will not be earned if the 4% rfr
in the givens in the instructions is utilized.
6. Find an appropriate rm percentage for the previous fiscal year. Full credit will
not be earned if the 8% rpm given in the instructions is utilized.
7. Construct the current CAPM rs for the firm. Please review page 258, equation
6.14.
8. Construct the current WACC for the firm. Please review page 375, equation
9.2. Note that you do not have to utilize the short-term debt portion in the
equation.
9. Calculate the beta unlevered. Please review page 611, equation 15-10.
10. Calculate the new beta levered at plus or minus 5% or 10% intervals of wd in
the firm’s capital structure. Please review page 611, equation 15.9a.

11. Determine the new rs CAPMs at each differing capital structure utilizing the
new-levered betas.
12. Make sure to adjust the rd by plus or minus the percentage of wd’s change, so
that a leverage increase of 5% should result in a new rd of (rd*1.05) and a leverage
decrease of 5% should result in a new rd of (rd*0.95). Please refer to page 610 figures
15-5.
Please review the week-10 announcement that includes information on problems 15-9,
15-10, and 15-11 on pages 622 and 623.
13. Replicate rows 1 to 6 in figure 15-5 on page 610 to determine the capital structure
where WACC is minimized.
14. Graph the WACCs at the different capital structures of the firm as stated in the
instructions. Note that the WACC graph should be in a "U" shape.
15. Calculate the FCF utilizing Figure 2-5 on page 65. Please show the calculations
for steps 1 to 5.
16. Using a zero-growth valuation model of V^0 = FCF/WACC, determine the V^0 at
the optimal capital structure.
17. Determine the estimated stock price per share utilizing Figure 7-6 on page 309.
18. Review that stock price of the firm at the close of fiscal 2015. Compare the market
price to the calculated intrinsic price, and make a recommendation on the stock. Support
your recommendation with stock chart and analysts’ information.
Note:
1.you find the pages with the figures uploaded as been asked in the instructions (pages
number on each one, including the figures)
2. I will provide you the link for the 10-K of the company
(http://www.pginvestor.com/Cache/30866951.PDF?
O=PDF&T=&Y=&D=&FID=30866951&iid=4004124)
http://www.pginvestor.com/Doc/Index?did=33500927
3. Please provide the pages number as references. And all other references
4. Please don’t forget any of the project instructions and try to get perfect work
Thank you.