Aswath Damodaran 176
Disney’s Divisional Costs of Capital
Business Cost of After-tax E/(D+E) D/(D+E) Cost of capital
Equity cost of debt
Media Networks 10. 10 % 3. 29 % 78. 98 % 21. 02 % 8. 67 %
Parks and Resorts 9. 12 % 3. 29 % 78. 98 % 21. 02 % 7. 90 %
Studio Entertainment 10. 43 % 3. 29 % 78. 98 % 21. 02 % 8. 93 %
Consumer Products 10. 39 % 3. 29 % 78. 98 % 21. 02 % 8. 89 %
Disney 10. 00 % 3. 29 % 78. 98 % 21. 02 % 8. 59 %
All of the divisions are assumed to share the same debt ratio and the cost of
debt. If they had borrowed on their own, we would have used division specific
debt ratios and costs of debt.
These would be the hurdle rates that we would use to analyze projects at each of
these divisions.
