Return to the same MS Excel file you submitted for Memo 5. Under the Week 6 tab, gather the information needed to determine the WACC and leverage ratio information about your chosen company (Starbucks)

Return to the same MS Excel file you submitted for Memo 5. Under the Week 6 tab, gather the information needed to determine the WACC and leverage ratio information about your chosen company (Starbucks) and its closest competitor (McDonalds). (Hint: Enter the requested information to figure out your WACC and leverage ratios. The MS Excel formulas are already done for you.) Please use the Memo Template attached for guidelines. Please submit answer in a Word Doc and the spread sheet on excel.

Part Two

In a memo to the Chief Executive Officer, answer the following questions, which are pre-loaded in your Memo Template:

The weighted average cost of capital (WACC) represents a firm’s average cost of capital from all sources, including common stock, preferred stock, bonds, and other forms of debt. WACC is a common way to determine the required rate of return because it expresses, in a single number, the return that both bondholders and shareholders demand to provide the company with capital. A firm’s WACC is likely to be higher if its stock is relatively volatile or if its debt is seen as risky because investors will demand greater returns. Considering this information, what is the WACC of your chosen company and its closest competitor? Does one company appear more volatile than the other? How does the WACC translate to both companies’ stock performance?

Leverage ratios measure the amount of capital that comes from debt. In other words, leverage financial ratios are used to evaluate a company’s debt levels. The debt ratio measures the relative amount of a company’s assets that are provided from debt. Considering this information and drawing from the information in your course material, find three debt/leverage ratios for your chosen company and its closest competitor. How does your chosen company compare to its closest competitor, as far as these ratios? What inference can you draw from the historical ratios and where they are now?

Which of the two companies is the “better run company”? (Keep in mind that you will get posed this question for the next several weeks. Track of how you grow from this week to the next week with your response.)

Criteria Level 3 Level 2 Level 1 Criterion Score

Content Data gathered in the spreadsheet is 90% to 100% accurate Data gathered in the spreadsheet is 80% to 89% accurate Data gathered in the spreadsheet is 70% to 79% accurate Data gathered in the spreadsheet is below 70% accurate or is not present. / 20

Analysis The assignment’s content is thorough, well organized, and provides critical thinking into the topic(s) presented in the course material and textbook. Additionally, the submission is at least 500 words. The assignment’s content addresses the topic(s) for the week and shows thought was given to the topic(s) presented in the course material and textbook. Or the submission is between 400 and 499 words. The assignment’s content is evident; however, it is lacking in critical thinking or is not well organized to the topic(s) presented in the course material and textbook. Or the submission is at least 200 words but not 300 words in length. No memo submitted or the submission is below 200 words in length. / 20

Reference, Spelling, Grammar, and Mechanics No issues with spelling, grammar, or mechanics. The reference selected is applicable to the week’s content. The reference is at the end of the analysis, so the instructor can review the reference. Reference follows current APA format. Minor issues with spelling, grammar, or mechanics. The reference selected is applicable to the week’s content. The reference does not provide either a title or a link for the article. Reference follows current APA format. Several issues with spelling, grammar, or mechanics. The reference selected is applicable to the week’s content. The reference is at the end of the analysis, but the title is mislabeled, or the link is to an incorrect reference. Reference follows current APA format. Significant issues with spelling, grammar, or mechanics make the assignment difficult to read and understand. The reference provided is not applicable to the week’s content. Or no reference was provided. / 5

TotalScore of Analysis Memo Rubric,/ 45

Overall Score

LEVEL 4

41 points minimum

LEVEL 3

38 points minimum

LEVEL 2

31 points minimum

LEVEL 1

0 points minimum

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