1. Comcast Cost of Capital
Terry Salazar,DaveOliver & KyleDuca
Professor MichelleLowry
Intermediate Corporate Finance302
April 20,2015
The Cost of Capital for Comcast came out to 4.81 percent. For our calculations we employed the Capital
Appreciation Model (CAPM) to determine the required return on Equity for Comcast for use in the Weighted
Cost of Capital (WACC) Formula. The numbers that were placed in the model and their sources arebelow:
 The Risk Free Rate (Rf) was obtained from the Ten YearNote provided by the Department of
Treasury website as of close of business Friday April 17, 2015 at 1.87 percent.
 Beta was obtained as the mean of various websites Google 1.22, Nasdaq 1.02, Yahoo finance .96,
and Reuters .94.
 The Market rate was obtained from the historical geometric average returns of the S&P 500 at 9.6%.
Data was provided by the Stern School of Business in New York.
CAPM RE = RF + β (RM-RF) = 10.39=1.87 + 1.1025(11.53-5.28) Expected return on equity equals 8.76
After determining the cost of capital as 10.39% we then employed that number in to the WACC
formula. Explanations for other numbers for the WACC formula are below:
 Return on debt was gathered from the yield to maturity on Comcast Ten year bond.
 The amount and percentageof debt was gathered from Comcast fourth quarter financials provided
on the company website (Total debt excluding other noncurrent liabilitiesthese were excluded as
they relateto company obligations towards retirement accounts.
 The amount and percentageof Equity was gatheredfrom Comcast fourth quarter financials provided
on the company website (Capital structure revealed 35% equity and 65% debt financing)
 The value of the company was gathered from the Market Cap provided by the Nasdaq website.
 The tax ratewas estimated at 37% as we discussed in class to employ a ratebetween 35 and 40
percent.
WACC (1-Tc)*RD (D/V) + RE (E/V)  (1-.37)*.0286(.65) + .0876(.35) = 4.24%
Dividends:
 Comcast dividends have ranged between .195 and .25 dollar per share on a quarterly basis. The .25
dollar per share was recently declared after the last earnings period which will bring the 2015
dividend to annualize to 1 dollar per share. The dividend is 1.68 percent of the stock price.
Capital Structure, Leverage and Beta Discussion:
Our first thought when looking at Comcast financials was the higher amount of leverage. Nearly two
thirds of the company value is debt. Then we remembered it as only been a few years since the acquiring
controlling interest of NBC Universal. Also when we compared Comcast with their competitors, Dish
Network, Verizon and Direct TV, Comcast appears to have a much stronger position. Comcast’s Beta (1.1025)
seems to indicate the company deviates approximately 10 percent from the Market making Comcast slightly
riskier than the market. When considering Comcast’s industry (media & entertainment) it is one that is fairly
stable and here to stay. There is generally a high constant demand for entertainment similar to what we
might expect for food, therefore we can rationalize a greater amount of leverage in a firm like Comcast, as
they have steady cash flows to make interest payments. Overall, Comcast’s cost of financing shouldn’t be
expected to be too largebecause of their consistency in earnings and strong market position as a largeglobal
firm.