Apple Inc. is an American technology company founded in 1976 that designs, develops, and sells consumer electronics, computer software, and online services. This document calculates Apple's weighted average cost of capital (WACC) of 6.01% based on a cost of debt of 1.77%, cost of equity of 6.69%, debt/value ratio of 13.68%, and equity/value ratio of 86.32%. The WACC represents the average rate of return that Apple must earn on its projects to satisfy its shareholders and creditors.

1. Weighted Average Cost of Capital
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Apple Inc.
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Prepared by
Alpha

2. Name of the group members
Name ID Section
A S M Shihab 12202120 D
Md. Manik Mia 12202146 D
Pulok Kundu 12202144 D
Lucky Hasan 12202149 D
Shakila Akter 12202155 D
Nibedita Sarker 13102330 D
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3. Company profile
• Apple Inc. (previously Apple Computer, Inc.) is an American
multinational corporation.
• Apple Inc. ignited the personal computer revolution in the
1970s with the Apple II.
• Established : on April 1,1976.
• Founders : Steve Jobs, Steve Wozniak, and Ronald Wayne.
• Industry :
Computer Hardware
Computer Software
Consumer electronics
Digital distributions
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4. • Apple TV
• iPad
• iPhone
• iPod (Classic, Nano, Shuf
fle, Touch)
• Mac (iMac, MacBook, ac
Book Air, MacBook Pro,
Mini, Pro)
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Major Hardware
Products
Major Software
Products
• Mac OS X
• iOS
• iTunes
• iWork
• QuickTime
• Safari
• iLife

5. Weighted Average Cost Of Capital –
WACC• Definition-A calculation of a firm's cost of capital in which each category
of capital is proportionately weighted.
• Formula
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E = Market value of the company's equity
D = Market value of the company's debt
V = Total Market Value of the company (E + D)
Re = Cost of Equity
Rd = Cost of Debt
Tc= Tax Rate

6. Calculation of the cost of capital
• Cost of debt
• Cost of Equity or R Equity
• WACC
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7. Information for calculation
• Tax Rate = 26.22%
• Average Market Return 1950 – 2014 = 7%
• Cost of Debt (before tax) or R debt =2.4%
• Cost of Equity or R equity = 6.69%
• Debt for 2014 or D = $85.810 billion
• Stock Price = $628.66
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8. Cont.
• Outstanding Shares = $861.38 million
• Equity = Stock price x Outstanding Shares
or E = ($628.66*$861.38 million)
• = $541.515 billion
• Debt + Equity or D+E = ($541.515 +$85.810)
billion
• = $627.325 billion
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9. Calculation of Cost of debt
• Cost of debt (before tax) = Corporate Bond rate of
company’s bond rating.
• Current cost of Debt as of June 2, 2014 = 2.4%
• 2014 Apple has averaged tax rate of 26.22%
• Cost of Debt (After Tax) = (Cost of Debt Before Tax)
(1 – Tax Rate)
• Cost of debt after tax =.024 x (1 – .2622)
=1.77%
The higher the cost of debt, the higher the
risk.
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10. Calculation Cost of Equity or R Equity
• Risk Free Rate = U.S. 10-year bond = 2.51%
• Average Market Return 1950 – 2014 = 7%
• Beta = Apple’s Beta = 0.93
• R Equity =Risk Free Rate + Beta Equity
(Average Market Return – Risk Free Rate)
=2.51 + 0.93 (7- 2.51)
=2.51 + 0.93 x 4.49
=2.51 + 4.18
= 6.69% 10

11. Calculation of WACC
WACC= (1 – Tax Rate) x R debt (D/D+E) + R
equity (E/D+E)
= (1 – .2622) x .024 x ($85.810 /$627.325) +
.0669 ($541.515 /$627.325)
=.7378 x .024 x .1368 + .0669 x .8632
=.0024 + .0577
= 6.01%
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12. Current performance:
• #1 World's Most Valuable
Brands.
• #12 Global 2000.
• #11 in Sales.
• #3 in Profit .
• #114 in Assets .
• #1 in Market value .
• #55 America's Best Employers
.
• #79 Innovative Companies .
• EPS growth of 20 percent .
• Cumulative returns to $94 billion.
• Revenue between $63.5 billion and
$66.5 billion.
• Gross margin between 37.5 percent
and 38.5 percent.
• Operating expenses between $5.4
billion and $5.5 billion.
• Other income/(expense) of $325
million.
• Tax rate of 26.5 percent.
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13. QUERIES?
??
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14. Conclusion
Based on the calculations above, we can
conclude that Apple pays 6.01% on every
dollar that it finances, or 6.01 cents on every
dollar. From this calculation, we understand
that on every dollar the company spends on an
investment, the company must make $.0585
plus the cost of the investment for the
investment to be feasible for the company.
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15. THANK
YOU!!!
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