Wacc for Fedex Corp.

Preface First of all, I would like to thank Ms. Thuy for her enthusiastic guidance and result all of questions to help me complete this exercise easily. Simultaneously, thanks to her professional lectures on class which also build me with deep understanding of how to access and deal with problems in financial management so that I can complete this report. All of the data is collected through 2 website http//finance. yahoo. com/ and http//www. finra. org/ I. ABOUT FEDEX CORPORATION FedEx Corporation is a holding caller-out.The Company provides a portfolio of transportation, e-commerce and business services under the FedEx brand, originally known asFDX Corporation, is an American globalcourierdelivery services company headquartered inMemphis, Tennessee. FedEx Corporation is a Delaware corporation, incorpo charge per unitd October 2, 1997. FDX Corporation was founded in January 1998 with the acquisition of Caliber System Inc. by Federal Express,the worldslargest airlinein terms of pa ck tons flown and the worlds fourth largest in terms of fleet size, delivering packages and freight to more than 375 destinations in nearly every country each day.With the purchase of Caliber, FedEx started offering early(a) services besides express shipping. TheStandard Carrier Alpha Code (SCAC)is a unique code used to identify transportation companies. It is typically dickens to four alphabetic letters long. It was developed by theNational Motor Freight Traffic Associationin the 1960s to help the transportation exertion for computerizing data and records. FedExs codes include * FDE FedEx Express * FDEG FedEx Ground * FXFE FedEx Freight * FDCC FedEx Custom Critical II. STATISTICS AND CALCULATION 1. SummarystatisticsAccroding to the collected data There is one non- callable pose issues of FedEx Corporation (FDX) in the ten-year maturity which is FDX. GD, use its yield of maturity as the pre-tax cost of debt. * Market cherish of equity 34. 3 billions in USD * Value gold 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 comparability a. The market value of debt Using the collected data in the appendix 3, the market value of debt can be easily calculated The market value of FDXs debt = $250,000,000*105. 08%+$750,000,000*130. 704%+$239,000,000*131%=$1,557,390,000 * Total value of the profligate = Total of market value of debt and equity =$34,300,000,000+$1,557,390,000=$35,857,390,000 b. The weights 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 get GMs WACC Cost of Equity = Risk-Free Rate + Equity Beta * Market Risk Premium =2%+1. 32*5%= 0. 086 useful Cost of debt = Rd1-Tc=5. 89%1-0. 35=0. 0376 WACC is the average of the costs of these sources of financing, each of which is weighted by its respective use in the given situation. By taking a weighted average, we can see how much interest the company has to pay for every dollar 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 bills flows with risk that is similar to that of the overall firm. The WACC equation is the cost 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 approximately 8. 3898%. III. APPENDIX Appendix 1 Market value of equity Enterprise value cash Beta $34. 3 $34. 02 1. 32 *dollar amount in billions Appendix 2 Risk free rate Pre-tax cost of debt (Rd) % 5. 789 Appendix 3 stick Symbol Issuer Name Coupon Maturity Callable Price Yield Amount outstanding FDX. GX FEDERAL extract CORP PASS THRU TR - - No 121. 375 4. 153 - FDX. HR FEDERAL EXPRESS C ORP - - 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