Study the ComprehensiveWACC Example document attached in the Module 6 assignment tabon Canvas. After becoming comfortable with the conceptsand calculations in this example, complete the activities below forthis week’s participation assignment. (Following theComprehensive WACC Example document for each step should make thisassignment easier!)

1. Hearty Foods, Inc. (HFI) is a mid-cap consumer staplescompany started in 2008 to produce organic food products for majorgrocery chains. To capitalize their business, they have issued 21.5million shares of common stock in the past three years and arecurrently trading on the NASDAQ exchange at $18.75 pershare.

Calculate theequity market value of the company.

2. HFI has also issued 175,000 bonds over this same timeframe.Each bond was issued with a $1,000 face amount and a 20-yearmaturity.

What is the value ofthe debt portion of their capital structure?

3. HFI is trying to determine what their cost of equity istoday. The current risk-free rate of return is 3.75% and the betais 1.15. It is generally agreed that the expected market rate ofreturn is 6.75%.

Using the CAPMformula, what would be BHT’s cost of equity?

4. The issued HFI bonds have interest rates ranging from 2.75%to 5.25% over this timeframe. In order to calculate the cost ofdebt, HFI decides to use the interest expense method. Referring tothe most current income statement, the interest expense is $3.78million and the long-term bonds value is $120 million.

Using thisinformation, what is the cost of debt?

5. Using the same income statement, HFI can see their incomebefore tax was $4.115 million. The income tax paid for the fiscalyear was $1,008.175.

Calculate theincome tax rate for BHT.

Determine theafter-tax factor to use in the WACC formula.

6. The final inputs needed for the WACC formula is theweighted percentages of equity and debt.

Using the valuesabove, calculate both percentages here.

Total market capitalizationvalue

Weightedequity percentage

Weighted debtpercentage

7. Now that you have gathered all of the inputs necessary forthe WACC formula, calculate the WACC percentage. Show yourwork.

Weighted average cost of capital is a total cost of capital of afirm calculated on the basis of proportionally weight..Take thecost of debt or debentures net of tax. To determine the cost ofdebt..use the rate which company pays interest. So we can take adeduction of interest expenses while paying tax so there is a taxsaving on it so we can deduct the amount of tax on it.

8. What does the weighted average cost of capital percentage meanto the owners of HFI?

Gilead Sciences, Inc. (GILD)                $71.33

At close: July 2 4:03PM EDT

Income Statement

All numbers in thousands

Revenue	12/31/2017	12/31/2016	12/31/2015
Total Revenue	26,107,000	30,390,000	32,639,000
Cost of Revenue	4,371,000	4,261,000	4,006,000
Gross Profit	21,736,000	26,129,000	28,633,000
Operating Expenses
Research Development	3,734,000	5,098,000	3,014,000
Selling General and Administrative	3,878,000	3,398,000	3,426,000
Operating Income or Loss	14,124,000	17,633,000	22,193,000
Income from Continuing Operations
Total Other Income/Expenses Net	523,000	428,000	54,000
Earnings Before Interest and Taxes	14,647,000	18,061,000	22,347,000
Interest Expense	1,118,000	964,000	688,000
Income Before Tax	13,529,000	17,097,000	21,659,000
Income Tax Expense	8,885,000	3,609,000	3,553,000
Minority Interest	59,000	476,000	579,000
Net Income	4,628,000	13,501,000	18,108,000
Preferred Stock And Other Adjustments	-	-	-
Net Income	4,628,000	13,501,000	18,108,000

Shares outstanding:           1.3 billion

Beta:                                     1.39