Report on Capital Structure and the Cost of Capital of AstraZeneca Plc and British American Tobacco Plc.

Table of Contents

1.0 Introduction………………………………………… 4

2.0 Background………………………………………… 5

3.0 Capital Structure…………………………………… 6
3.1 Debt to equity……………………………… 6
3.2 Long term debt to equity…………………... 7
3.3 Total debt to capital………………………… 7
3.4 Long term debt to capital…………………... 8
3.5 Balance sheet structure AZN………………. 9
3.6 Balance sheet structure BAT………………. 10
3.7 Discussion…………………………………. 10-11

4.0 Cost of capital……………………………………… 12
4.1 Introduction………………………………... 12
4.2 Weighted average cost of capital………….. 12
4.3 Dividend growth model…………………… 12-14
4.4 Capital asset pricing model………………... 14-16
4.5 Discussion…………………………………. 16-17

5.0 References…………………………………………. 18

6.0 Link to excel workbook……………………………. 18

Capital Structure and the Cost of Capital
1.0 Introduction

This report provides financial analysis of two top publicly traded companies from very different sectors. AstraZeneca Plc(AZN) and British American Tobacco Plc(BAT).

The structure of the report will be aimed at meeting the objectives of the brief:

Empirical observation Comparative analysis Impact of industry conditions Economic environment Business environment

For consistency of information all the data used, unless otherwise stated, is obtained from ThomsonONE.

All data can be accessed via this link to the excel workbook.

2.0 Background

AstraZeneca (AZN)

The capital structure of AZN is very much driven by the sector that it resides in, namely the Pharmaceuticals & Biotechnology sector.
AZN is highly capital intensive due to the need for continuous development and the funding