Description
What role(s) does modeling and simulation fill in the Test & Evaluation (T&E) process?
Requirements: Answer all questions completely. Post should be 260 words or more, use only creditable sources.Explanation & Answer
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Running head: WACC FOR TRIPADVISOR
1
WACC for TripAdvisor
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WACC FOR TRIPADVISOR
2
Company’s credit rating
Based on Moody’s, TripAdvisor’s credit rating is AAA. This is because itslong term debt
of the financial quarter year that ended on March 31st 2019 was $0M. This falls under default
rate of 0.18%,giving it the highest rating of AAA. This means that Trip Advisor has a very low
probabilityof default since it has no cost of debt capital. Trip Advisor has a current and a quick
ratio of 2, which means it is in a better position to pay off short term debts and lease obligations
and that’s why it registered a debt of $0. TripAdvisor is also very volatile due to the 1.36 beta
(Land, 2019).
From fidelity fixed income, the yield for 30-year bond for a corporation with AAA rating is
3.58%. Thus cost of debt (Rd) =3.58.
Cost of equity
The Beta of Trip Advisor is 1.36 (Analytics, 2019).
Three- month treasury yield= 2.15%(Fidelity fixed income).
Equity premium risk: 5.4% (Weston, 2017).
Cost of equity=risk free rate +Beta*(Equity premium).
=2.15 + (1.36*5.4)
=2.15+7.344
Re=9.594.
Firm capital, equity an...
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