11. Use the Standard & Poor's Market Insight website (www.mhhe.com/ edumarketinsight) for this problem. Assume Starbucks Corporation is reviewing the cost of equity and the WACC it uses to evaluate new investments. Management collected the following information as of September 30, 2004:

a. Use Starbucks' September 2004 beta (B) to calculate the company's cost of equity capital. (To find beta go to Excel Analytics, Valuation Data, Profitability.)

b. As of September 2004, calculate Starbucks' WACC. (Hint: For purposes of this exercise, use Total Liabilities as the company's book value of debt. You can find Total Liabilities on Starbucks' Annual Balance Sheet under Excel Analytics. The common shares outstanding are there as well. For the closing market price check Profitability.)

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Yield to maturity on debt Coupon interest rate on debt Tax rate 8% 9% 40% Long-term government bond rate Historical excess return on common stocks 4.5% 6.4%