Wacc for Fedex Corp.

Preface First of all, I would like to thank Ms. Thuy for her enthusiastic guidance and response all of questions to helper me complete this exercise easily. Simultaneously, thanks to her professional lectures on class which in like manner build me with deep understanding of how to access and deal with problems in financial management so that I sess complete this report. All of the info is collected through 2 website http//finance. yahoo. com/ and http//www. finra. org/ I. ABOUT FEDEX corporationORATION FedEx flock is a holding company.The Company provides a portfolio of transportation, e-commerce and business function under the FedEx brand, sooner known asFDX Corporation, is an American globalcourierdelivery services company headquartered inMemphis, Tennessee. FedEx Corporation is a Delaware corporation, incorpo appreciated October 2, 1997. FDX Corporation was founded in January 1998 with the acquisition of Caliber System Inc. by Federal Express,the worldslargest airlinein t erms of freight tons flown and the worlds fourth largest in terms of dart size, delivering packages and freight to more than 375 destinations in nearly every country for each one day.With the purchase of Caliber, FedEx started offering other services besides express shipping. The exemplar Carrier Alpha Code (SCAC)is a unique code utilise to identify transportation companies. It is typically two to four alphabetic earn long. It was developed by theNational Motor Freight Traffic standoffin the 1960s to help the transportation industry for computerizing data and records. FedExs codes take * FDE FedEx Express * FDEG FedEx Ground * FXFE FedEx Freight * FDCC FedEx Custom Critical II. STATISTICS AND CALCULATION 1. epitomestatisticsAccroding to the collected data There is one non- callable bond issues of FedEx Corporation (FDX) in the ten-year maturity which is FDX. GD, persona its yield of maturity as the pre-tax greet of debt. * Market value of lawfulness 34. 3 billions in U SD * Value notes 34. 02 billions in USD * The beta is 1. 32 and risk-free rate is 2% * A market risk premium of 5% and tax rate of 35% 2. Estimated equation a. The market value of debt Using the collected data in the appendix 3, the market value of debt can be easily careful The market value of FDXs debt = $250,000,000*105. 08%+$750,000,000*130. 704%+$239,000,000*131%=$1,557,390,000 * bring value of the firm = Total of market value of debt and equity =$34,300,000,000+$1,557,390,000=$35,857,390,000 b. The fishs for FedExs equity and debt Weight for equity =34,300,000,00035,857,390,000=95. 6567% Weight for debt=1,557,390,00035,857,390,000=4. 3433% 3. Apply the CAPM to Calculate GMs WACC Cost of justice = Risk-Free Rate + Equity Beta * Market Risk bounty =2%+1. 32*5%= 0. 086 Effective Cost of debt = Rd1-Tc=5. 89%1-0. 35=0. 0376 WACC is the average of the courts of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weig hted average, we can see how much interest the company has to pay for every one dollar bill it finances. A firms WACC is the overall required return on the firm as a whole and, as such, it is often used internally by company directors to determine the economic feasibility of expansionary opportunities and mergers.It is the appropriate discount rate to use for cash flows with risk that is similar to that of the overall firm. The WACC equation is the apostrophize of each capital component multiplied by its proportional weight and then summing WACC= EV. Re+DV. Rd(1-Tc) We can easily calculate WACC of FedEx Corporation is nearly 8. 3898%. III. APPENDIX Appendix 1 Market value of equity go-ahead value cash Beta $34. 3 $34. 02 1. 32 *dollar descend in billions Appendix 2 Risk free rate Pre-tax cost of debt (Rd) % 5. 789 Appendix 3 Bond Symbol Issuer Name Coupon maturity Callable Price Yield Amount outstanding FDX. GX FEDERAL express mail potbelly PASS THRU TR - - No 121. 37 5 4. 153 - FDX. HR FEDERAL EXPRESS CORP - - No - - - FDX. HO FEDEX CORP 7. 38 01/15/2014 Yes 105. 608 0. 507 $250,000 FDX. HP FEDEX CORP 8 01/15/2019 Yes 130. 704 2. 327 $750,000 FDX. GD FEDERAL EXPRESS CORP 7. 6 07/01/2097 No 131 5. 789 $239,000 *dollar amount in thousands