I am doing a research on Radio Shack Corporation. I need someassistance in findi

Question

I am doing a research on Radio Shack Corporation. I need someassistance in finding certain parts of the paper. I need assistancein finding the WACC, the cost of debt, and the cost of equity. Whatinformation do I need to get from the annual report or 10-k to getthis assistance. I need the formula for each one to go along withthe answer and the way you derived at that particular answer. Theother parts of the paper I have, but those are the three that I amhaving trouble with. Please help!!!! Let me know what information you need to know because theinformation is on the Radio Shack web page, if you don't mindgetting it from there and let me know. Thanks I am doing a research on Radio Shack Corporation. I need someassistance in finding certain parts of the paper. I need assistancein finding the WACC, the cost of debt, and the cost of equity. Whatinformation do I need to get from the annual report or 10-k to getthis assistance. I need the formula for each one to go along withthe answer and the way you derived at that particular answer. Theother parts of the paper I have, but those are the three that I amhaving trouble with. Please help!!!! Let me know what information you need to know because theinformation is on the Radio Shack web page, if you don't mindgetting it from there and let me know. Thanks

Explanation / Answer

WACC = WdKd(1-T) + WpKp + WsKs where Wd is % of Debt in Total Capital of Firm, Wp is % of preferedstock in Total capital of Firm & Ws is % of Common Equity inTotal Capital of firm. Eg, Total Capital of Firm is 100. It has Long term Debt of 30. SoWd = 30/100. If firm has prefered stock of 10 then Wp=10/100 Firm's common eqity is 60. So Ws = 60/100 Similarly Kd is Rate of Interest on Long Term Debt Kp is % Dividend on Pref shares Ks is Cost of equity. Ks= Krf + (Km-Krf)*Beta When you look up firm's stock price using google, u will see Betaalso listed along with share price Krf = Risk free rate of return = Return on Treasury bonds Km= Reqd rate of return on Stock Else you can find Ks = D1/P0+g where D1 is Dividend per share, P0is Share price & g is avge rate of growth of Dividend in pastyears. You will get the data from Firm's balance sheets & annualreports. Take last 3 yrs reports so you can see Trends. If trendsare not consistent. then take 5 yrs data & so on. The research is judgemental & uses approximations. So u can beconservative in your predicstions or aggressive. Hope this helps T is Income Tax rate for firm

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