A 1. Dividend Growth Model (DGM) Approach DO/D1? G PO Required Return/Cost of Equity Semiannual-Coupon Payment Bond ON 1 Coupon Rate 2 Price B COST OF EQUITY 1 1.0% 15 7.67% COST OF DEBT 10 years 11% 1,067 1,000 C 3 Face 4 Rate-Calculate the Period Rate (use the rate function) SYTM-Before-tax Cost of Debt (remember the modification from PR to YTM) 16 Tax Rate 21% 17 After-tax Cost of Debt 18 19 20 D 2. SML Approach Risk-free rate 8.69% Beta E(Rm) E(Rstock)/Cost of Equity E You can modify N, calculate PMT in this column. 20 5500% 2% 1.4 8% 10.40% F G Stock Price Bond Price Weight of Equity Weight of Debt H 9.81% I 65% 35% WEIGHTS 15 Stocks outstanding 1067 Bonds outstanding J 400,000 EQUITY 3,000 DEBT K VALUE OF FIRM WACC-Based on SML Approach (Use E6 for cost of equity) Remember the formula: L WACC-Based on Dividend Growth Model (Use B6 for Cost of Equity) 8.02% Remember the formula: 6000000 3201000 9201000 M WACC=Cost of Equity x Weight of Equity + After-tax Cost of Debt x Weight of Debt where you use E(Rstock) for Cost of Equity WACC=Cost of Equity x Weight of Equity + After-tax Cost of Debt x Weight of Debt where you use Required Return for Cost of Equity

antitien A The compuny has a beea of 1.4 and expected return on market is ax. Bisk free rate is 21 . Calculate cout of equity, based on 5M. 51.000. Thetas rate 4 213 and the compariy has 3,000 bonds outstanding. Calculate before and afteriar cost of debt. Calculiste WAce using MA. appreach te cal tulate cos of tqualy. CalculateWNCC ushe Dividend Gremth Model bpproach ie calculate Cent of tevity