Question

Hi, I'm a bit confused about Apple's wacc (doing a school valuation). How does the 66b$ in cash come into play when estimating their wacc?

Answer 1

doesn't play any role... WACC involves only debt and equity... or perhaps! how much debt more you could leverage on to seek for more debt, so-called optimal capital structure... but i doubt it.

Answer 2

Ok, I can't see any reason for them to lever up anytime soon, and there will be no optimal capital structure analysis. So you're saying that since they have no debt I can simply use the cost of equity to discount future cash flows to firm and add the financial assets to arrive at the quity value?

Answer 3

If a firm doesn´t have debt, its WACC is equal to cost of equity. Your problem will be choose the best method to find the Ke. Among all methods are CAPM, APM, 3-factor model and others.