Year
Commitment
($millions)
Present Value
($millions)
6–9 258.25 704.93
Debt value of
leases
1,752.85
Addingthedebtvalueofoperatingleasestothemarketvalue
ofdebtof$12,915millionyieldsatotalmarketvaluefordebt
of$14,668millionatDisney.Usedinconjunctionwiththe
market value of equityof $55,101 million,we arrive ata
marketdebt-to-capitalratioof21.02%.Toprovideacontrast,
considerthedebtratioswewouldhaveobtained ifwehad
used thebook valuesof $13,100 million forthe debtand
$24,219millionforequity.Theresultingdebt-to-capitalratio
would have been 35.10%.
Can Financing Weights Change over Time?
Usingthecurrentmarketvaluestoobtainweightswillyielda
cost of capital for the current year. But can the weights
attachedtodebtandequity,andtheresultingcostofcapital,
changefromyeartoyear?Absolutely,andespeciallyinthe
following scenarios.
Young Firms
Youngfirmsoftenareallequityfundedlargelybecausethey
donothavethecashflows(orearnings)tosustaindebt.As
theybecomelarger,increasingearningsandcashflowusually
allowformoreborrowing.Whenanalyzingfirmsearlyinthe
lifecycle,weshouldallowforthefactthatthedebtratioof