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Both of the financial professionals are presenting a biased opinion  by not considering all the factors at hand. Mr. Connors is comparing the investment only with the risk free government treasury bond whereby interest rates offered by government are at record low level in order to provide a stimulus to a recovering economy. On the other hand, Ms. Windsor compared the potential return with solely equity market thereby evaluating the prospects against average return provided by S&P 500. However, the potential growth opportunities are best evaluated while accounting for the target capital structure of the firm to finance those growth opportunities for which WACC suits the most.

1. How should we reconcile the huge variation between Connors (talking about the low rates on debt) and Windsor (talking about the higher hurdle rates of various equity alternatives)? Does the WACC (opportunity cost of capital) even matter if there is such wide range in various philosophies from apparently intelligent financial professionals?

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WACC Calculation
		Estee Lauder	Ralph Lauren	Pvh Corp	Coach Inc	Tiffany & Co	Fossil Group
Cost of Equity
Beta from Bloomberg		0.92	1.02	1.12	1.07	1.08	1.28
Average Market Beta	1.08
Risk Free Rate	2.15%
Market Risk Premium	6%
Re	6.31%
Cost of Debt
Yield to Maturity on Long Term Debt		3.37%	3.18%	4.56%	4.39%	4.07%	4.97%
Average Yield	4.09%
Rd	4.09%
Weights of Debt & Equity
Long Term Debt		1910	839	3197	862	878	610
Short Term Debt		331	23	19	15	229	26
Total Debt		2241	862	3216	877	1107	636
Shares Outstanding		368	81	79	279	125	48
Stock Price		97.28	71.52	104.88	46.32	91.54	9.1
Total Equity		35,799	5,793	8,286	12,923	11,443	437
Total Capital		38,040	6,655	11,502	13,800	12,550	1,073
Weight of Debt		5.89%	12.95%	27.96%	6.35%	8.82%	59.28%
Weight of Equity		94.11%	87.05%	72.04%	93.65%	91.18%	40.72%
Average Debt Weight	20.21%
Average Equity Weight	79.79%
Tax Rate	35%
Weighted Average cost of Capital	5.58%

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