ThecostofcapitalforDisneyasacompanyis8.59%,butthe
costsofcapitalvaryacrossdivisionswithalowof7.90%for
theparksandresortsdivisiontoahighof8.93%forstudio
entertainment.
KristinKandy:WhenestimatingthecostofequityforKristin
Kandy,weassumedthatthecompanywouldbefundedusing
thesamemarketdebt-to-equityratioasthefoodprocessing
industry(30%debt,70%equity).Tobeconsistent,weusethe
marketdebt-to-capitalratiotocomputethecostofcapitalfor
the firm. We also present two estimates of the cost of
capital—one usingthemarketbetaand theotherusingthe
total beta:
Thecostofcapitalestimatedusingthetotalbetaisamore
realistic estimate when valuing thecompany for sale in a
private transaction.
Embraer: To estimate the cost of capital in nominal U.S.
dollar and nominal BR terms for Embraer, we use the
estimated costs of equity (from Illustration 2.4) and the
after-taxcostsofdebt(fromIllustration2.5).Theweightsfor
debt and equity arecomputed using the estimated market