You recently completed your undergraduate degree in Business Administration, maj

Question

You recently completed your undergraduate degree in Business Administration, majoring in Finance. You are now working at PPL Corporation, at their corporate headquarters. Your first assignment is to estimate the weighted average cost of capital for the company. You can start by studying the annual report of PPL Corporation available at their website. You can use public information about the company, available at various sources, such as Yahoo Finance. You should identify the source of your data. In effect, you have to find the current values of the following quantities for the corporation. If you are unable to find a number precisely, you will have to estimate it.

http://www.pplweb.com/

http://finance.yahoo.com/

1. What is the income tax rate and the market value of debt of the company?
2. What is the market value of equity, the cost debt and the cost of equity?

Explanation / Answer

Data source:

http://finance.yahoo.com/q/bs?s=PPL+Balance+Sheet&annual

http://finance.yahoo.com/q/is?s=PPL+Income+Statement&annual

1) Debt value (Dec 31, 2014) = 18,856,000

2) Income tax rate = Tax expense / Income before tax

= 1024000 / 3388000

= 30%

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