1A.Sherwin-Williams is considering acquiring Valspar and needs to determine the WACC to use in its DCF valuation model. Assume that Sherwin-Williams would use the CAPM to determine the cost of equity as well as the following capital market information: (In millions) Enterprise Company Name Value Equity Value Total Debt Beta Tax Rate Valspar 3,000 750 1.10 30% 2,250 Yields on U.S. Treasury Securities, December 2019 3-Month Treasury Bills 1.0% 20-Year Treasury Bond 3.0% Average Returns on Bonds & Stocks, 1926 to 2019 20-Year Treasury Bond 6.0% S&P 500 11.0% Sherwin-Williams Bonds, December 2019 Maturity Date Security Seniority August 1, 2025 Debentures Senior Coupon Rate Offer Date 07/28/15 Price Yield to Maturity S&P Rating 104.5 A 5.0% 4.0% (Show all work on the paper exam.) [A] If they use 100% equity, determine the cost of equity and WACC they should use. (1.5 points) [B] If they use 50% debt and 50% equity, determine the cost of equity and WACC they should use. (2.5 points) 1A.Sherwin-Williams is considering acquiring Valspar and needs to determine the WACC to use in its DCF valuation model. Assume that Sherwin-Williams would use the CAPM to determine the cost of equity as well as the following capital market information: (In millions) Enterprise Company Name Value Equity Value Total Debt Beta Tax Rate Valspar 3,000 750 1.10 30% 2,250 Yields on U.S. Treasury Securities, December 2019 3-Month Treasury Bills 1.0% 20-Year Treasury Bond 3.0% Average Returns on Bonds & Stocks, 1926 to 2019 20-Year Treasury Bond 6.0% S&P 500 11.0% Sherwin-Williams Bonds, December 2019 Maturity Date Security Seniority August 1, 2025 Debentures Senior Coupon Rate Offer Date 07/28/15 Price Yield to Maturity S&P Rating 104.5 A 5.0% 4.0% (Show all work on the paper exam.) [A] If they use 100% equity, determine the cost of equity and WACC they should use. (1.5 points) [B] If they use 50% debt and 50% equity, determine the cost of equity and WACC they should use. (2.5 points)