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I have updated this with the appropriate Cost of Debt. Now my I would like to know if my WACC equation is correct?

Data for Hilton Group (HLT)

Equity: Market Cap 18.75 B *found on Yahoo Finance

Debt :

2016 - 10,641,000 *found on Yahoo Finance

2015 – 10,249,00 *found on Yahoo Finance **amount used in WACC calculation due to same number used in Cost of Debt

Annual Report 2015 figures – 9,821,000 *found in annual report – 10K

Risk-Free Rate: .72 *found on Yahoo Finance: Bond Center - 3 month Yield

Market Risk Premium: 5.5% *found in survey – http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2598104 / 7.6 average 1900 - 2004

Dividend Yield: Growth Rate 3.88% *Yahoo Finance, Analysist Estimates – next 5 years

Corporate Tax Rate: 35%

Cost of Equity using CAPM: E(R)= Rf + Beta (Expected Return on Market – Rf) = %

With Survey MRP =0.72+1.35*(5.5-0.72)= 7.173

With Average MRP =0.72+1.35*(7.6-0.72) = 10.08

Cost of Equity using Dividend Discount Model

= 3.88+.35 = 4.23

Cost of Debt:

Weighted Average Interest Rate – 4.2% *found on Hilton.com/quarterly results 2016/fourth quarter 2016 http://ir.hilton.com/~/media/Files/H/Hilton-Worldwide-IR-V3/quarterly-results/2016/q4-2016-earnings-release.pdf

WACC:

5.62% using CAPM cost of equity equation & survey market risk premium (5.5%)

7.43% using CAPM cost of equity equation & average MRP over years (7.6%)

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Beverley Smith
Beverley SmithLv2
28 Sep 2019

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