Estimating The Wacc Of Mylan Inc. Case Solution & Answer

Estimating The Wacc Of Mylan Inc. Case Solution

In the first step of the estimation of Weighted Average Cost of Capital (WACC) of Mylan Inc.;it is mandatory to find the company’s capital structure, for this purpose I have visited the Yahoo finance website and put the ticker number MYL at the search tab of the site, and clicked for further proceed.

After clicking on the search option; the following image appears on the site. In this image there are so many tabs containing the different type of the company’s information, such as: the conversation, statistics, financial and analysis etc. As I need the debt and equity information of the company, so I will click on the financial tab to find out the information related with the debt and equity of the company. Here I found three options, which are: income statement, balance sheet and cash flow. I have clicked on the balance sheet option. This information can be seen in the following image:

 

the conversation, statistics, financial and analysis etc. As I need the debt and equity information of the company, so I will click on the financial tab to find out the information related with the debt and equity of the company. Here I found three options, which are: income statement, balance sheet and cash flow. I have clicked on the balance sheet option. This information can be seen in the following image:

the conversation, statistics, financial and analysis etc. As I need the debt and equity information of the company, so I will click on the financial tab to find out the information related with the debt and equity of the company. Here I found three options, which are: income statement, balance sheet and cash flow. I have clicked on the balance sheet option. This information can be seen in the following image:
After looking at the balance sheet of the company; it could be seen that the company has short term debt, long term debt and the shareholders’ equity, which describes the complete capital structure that is required to be calculated the weighted average cost of capital of the company.
After the identification of the company’s capital structure;there is a need to calculate the company’s cost of debt, which is the major component of the company’s weighted average cost of capital. In the following image, I have found the current price of the bond, which is 101.63 USD according to the markets.businessinsider.com
(https://markets.businessinsider.com/bonds/mylan_nvdl-notes_201717-21-bond-2021-us62854aam62

 

After identifying the market price of the bond; there is a need to identify the yield to maturity of the bond, and for this purpose; the relevant bond information has been taken from the same page (attached in the below image).From the below mentioned image; it has been found

that the maturity of the bond is 5 years and the 10 coupon payments (2 payments in a year) during its maturity with the coupon rate of 3.15 % annually. By putting all these variables in the formula presented in following image; the yield to maturity of the bond is found to be: 2.80%, annually.

Here C is the coupon payment of the bond, F is the face value of the bond and r is the yield to maturity.

 

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