1. The company I chose is Dunkin Donuts. According to their website, Dunkin
Donuts is part of the quick service restaurant industry (About us: Our mission:
Dunkin, n.d.).
2. According to Guru Focus, the weighted average cost of capital (WACC) for
Dunkin Donuts, as of today, is 7.75%. The WACC is the after-tax cost of capital
from all sources and represents the cost that a company pays, on average, to
finance its assets. The formula used to calculate the WACC is computed by
multiplying the cost of each capital source by its weight, and then adding each
together (Hargrave, 2022).
3. The biggest risk I see for Dunkin Donuts right now involves supply chains. As a
result of COVID-19, supply chains have bottlenecked. Resources have become
more limited and more expensive to secure (The Economist Newspaper, 2022).
This will cause quick service restaurants, like Dunkin Donuts, to need for more
working capital. More working capital would increase the company’s WACC.
Another big player in the quick service restaurant industry’s WACC is climate
change (The Economist Newspaper, 2022). Greener, more sustainable energy is
becoming more important and capital is required to make transitions to greener
products. Things like straws, plastic cups, food wrappers all have potential to be
upgraded to more green choices.
References
About us: Our mission: Dunkin'®. About Us | Our Mission | Dunkin'®. (n.d.). Retrieved
December 8, 2022, from https://www.dunkindonuts.com/en/about/about-us
Dunkin' brands group (Nas:DNKN) WACC %. DNKN (Dunkin' Brands Group) WACC %.
(n.d.). Retrieved December 8, 2022, from
https://www.gurufocus.com/term/wacc/DNKN/WACC-Percentage/DNKN
Hargrave, M. (2022, November 3). Weighted average cost of capital (WACC) explained
with formula and example. Investopedia. Retrieved December 8, 2022, from
https://www.investopedia.com/terms/w/wacc.asp
The Economist Newspaper. (2021, January 1) Why capital will become scarcer in the
2020s. The Economist. Retrieved December 8, 2022, from
https://www.economist.com/finance-and-economics/why-capital-will-become-
scarcer-in-the-2020s/21806928
