Calculation and Report of Wacc of Microsoft
Bonds Microsoft’s long-term debt is composed of eight long-term bonds. It also has two short-term bonds that mature this year and early next year. These bonds were neglected in this report. In this report the required return was calculated by using the coupon rates, market values, time until maturity, and tax rate. These values were all found on Microsoft’s 2012 financial statement. The weighted average cost of debt was then found through the multiplication of each bond’s required return and their corresponding bond weights.
These bond weights were found through the multiplication of the quantity of bonds at each interest rate and the market value of each bond; this calculated value was then divided by the total amount of long-term debt, which gives the weights as a percent of the total debt. Microsoft’s total debt was calculated to be lkasdfjl;kasjdf, and the after-tax cost of debt was calculated to be asdfkl;safd. These are logical calculations, since the majority of Microsoft’s bonds do, in fact, have interest rates around 4%.
Note, the interest on Microsoft’s bonds is incurred on a semi-annual basis and was calculated in this report on the same basis. Therefore, the semi-annual cost of debt would be half this value: 2%. Some other notes to consider in bond calculations are given below: Do we have any other notes to consider guys? Feel free to message me, and I’ll add them, or add them yourselves if you think there is anything else to include.