(rE,

, WACC, beta, and sigma) Use the following data for the S&P 500 (the market portfolio in this case) and for Cobra returns:

Also assume:
• Cobra has 1,500,000 shares. The share price at the end of 2015 was $12.00.
• Cobra’s debt at year-end 2015 is $44,500,000, and its debt at year-end 2014 was $35,000,000. The amount of interest paid in 2015 by the company was $4,323,000.
• Cobra’s corporate tax rate was 36%.
• The looking forward, risk-free rate of interest at the end of 2015 was rf = 2.16%.

a. Calculate the mean return, the annual standard deviation (sigma), and the beta of the market portfolio and Cobra.

b. What was Cobra’s capital structure as of 2015 (market value of debt and equity)?

c. What was Cobra’s cost of equity and cost of debt?

d. Calculate Cobra’s WACC.

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A B C D 1 Calculating Cobra's WACC S&P 500 Cobra Risk-free 234567890 Year return return rate 2003 26.38% 34.50% 1.26% 2004 8.99% 7.64% 2.75% 2005 3.00% -1.09% 4.38% 2006 13.62% 12.73% 5.00% 2007 3.53% 0.37% 3.34% 2008 -38.49% -50.37% 0.37% 2009 23.45% 32.73% 0.47% 10 2010 12.78% 11.27% 0.29% 11. 2011 0.00% 4.12% 0.12% 12 13 14 15 2345 2012 13.41% 13.99% 0.16% 2013 29.60% 38.81% 0.13% 2014 11.39% 13.62% 0.10% 2015 2.62% 0.60% 0.10%