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We have used the WACC method to determine the value APN News & Media (APN) by discounting future unlevered cash flows to the present value with the WACC,
- Essay length: 2785 words
- Submitted: 25/05/2012
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Valuation
We have used the WACC method to determine the value APN News & Media (APN) by discounting future unlevered cash flows to the present value with the WACC, as it is a levered firm.
Weighted Average Cost of Capital (WACC) is calculated taking into account the relative weights of each component of the capital structure. This method discounts the unlevered cash flow by the weighted average cost of debt and equity of the firm.
Calculation of WACC
Step 1. Calculating rd or rate of return on debt
The cost of debt for APN can be determined by using the following formula:
Cost of Debt = Interest Bearing Borrowings & Long Term Debt
Financial Charges
We have extracted current and non-current borrowings and financial charges figures from the latest audited financial year end report being 2009:
Interest Bearing Borrowings & Long Term Debt of 2009
782,980,000
Financial Charges 2009
52,234,000
Cost of Debt (Rd)
6.67%
We note that there are 2010 audited half year financial reports available however we do not believe this represents an appropriate length of time to
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