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Finance Team Project
Homedepot
1. Calculate FCFs of the firm during 2008-2012, and then calculate the average annual growth rate of FCF over the period.
2012
2xxx
2xxx
2009
2008
2007
Operating Income(EBIT)
7766
6661
5839
4803
4359
7242
Depreciation
1568
1573
1616
1707
1785
1702
Tax
2686
2185
1935
1362
1278
2410
Operating Cash Flows
6648
6049
5520
5148
4866
6534
2012
2xxx
2xxx
2009
2008
2007
total assets
41084
40518
40125
40877
41,164
44,324
total current assets
15372
14520
13479
13900
13,362
14674
total net fixed assets(ending)
25712
25998
26646
26977
27802
29650
total net fixed assets(beg.)
25998
26646
26977
27802
29650
Depreciation
1568
1573
1616
1707
1785
1702
Net Capital Spending
1282
925
1285
882
-63
2012
2xxx
2xxx
2009
2008
2007
total current assets
15372
14520
13479
13900
13,362
14674
total current liabilities
11462
9376
10122
10363
111…(생략)
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ebt would have transformed into installments of long-term debt under current liabilities account. (In 2012, balance of installments of long-term debt increased by 1.3 billion, while balance of long term debt decreased by the same amount) Such increase in current liabilities would have resulted in abnormally increased FCF in 2012.
Therefore, our team decided to use 3% as a growth rate; FCFs of Home Depot are expected to grow by 3 percent every year in the future.
We predicted 2013’s FCF that makes the geometric mean of 6 years’ growth rates 3.
2013
2012
2xxx
2xxx
2009
2008
FCF
5434.67686
6600
3337
4415
2938
4688
3. Calculate WACC of the firm.
Estimate the cost of debt. Estimate the cost of equity based on CAPM.
To calculate the beta of the firm, download the adjusted stock prices and S&P 500 indices over last 5 years (use monthly data).
Cost of Debt
To calculate cost of debt, we should use weighted YTM. Therefore we found the data of Bonds issued by Home Depot
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