Fina 510 Assi 6

FINA520 6th Assignment Warning: Student must subroutine the Excel function wizard to calcaulate answers Student Name:SAPANPANCHAL INPUTS employ IN THE MODEL P0$50.00 Net Ppf$30.00 Dpf$3.30 D0$2.10 g7% B-T rd10% Skyes beta0.83 Market risk premium, MRP6.0% gamble free rate, rRF6.5% take roof building from debt45% Target capital expression from preferred express5% Target capital structure from prevalent monetary fund50% Tax rate35% Flotation appeal for common10% a. visualise the comprise of each capital component, i.e., the after-tax damage of debt, the personify of preferred variant (including flotation costs), the cost of equity (ignoring flotation costs) with the DCF method and the CAPM method. scathe of debt B-T rd x (1-T) =A-T rd 10%65%6.50% Cost of preferred neckcloth (including flotation costs) Dpf / Net Ppf =rpf $3. 30$30.0011.00% Cost of common equity, DCF (ignoring flotation costs) D1 / P0 + g =rs $2.25$50.007%11.

49% Cost of common equity, CAPM rs =rRF + b * MRP = 6.5%4.98%=11.4800% IMPORTANT blood line: HERE THE CAPM AND THE DCF METHODS PRODUCE APPROXIMATELY THE resembling COST OF EQUITY. THAT OCCURRED BECAUSE WE apply A BETA IN THE PROBLEM THAT ESTIMATED FORCED THE SAME RESULT. ORDINARILY, THE both METHODS WILL PRODUCE SOMEWHAT DIFFERENT RESULTS. b. Calculate the cost of new stock using the DCF model. D0 * (1+g) / P0*(1-F! ) + g =re $2.25$45.007%11.99% c. What is the cost of new common stock, based on the CAPM? (Hint: Find the...If you call for to get a full essay, coif it on our website: BestEssayCheap.com

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