A B 34 35 36 37 38 39 40 41 The first part of this assignment asks you to estimate the weighted average cost of capital (WACC) for Microsoft Corporation. As a starting point, use the "MSFT.xlsx" file I created (which you will find as attachment on Digiex). Assume that Microsoft's optimal debt ratio is 40%, tax rate is 30% and its cost of debt is 6%. 42 43 44 45 46 47 48 In your calculation of the required rate of return (i.e. return on equity) using the CAPM formula, assume the risk-free rate to be 3%. 01/08/19 01/09/19 01/10/19 01/11/19 01/12/19 01/01/20 01/02/20 01/03/20 01/04/20 01/05/20 01/06/20 01/07/20 01/08/20 01/09/20 01/10/20 01/11/20 01/12/20 01/01/21 01/02/21 01/03/21 01/04/21 01/05/21 01/06/21 01/07/21 01/08/21 01/09/21 01/10/21 01/11/21 134.620514 136.215118 140.467209 148.315048 155.032852 167.350937 159.269958 155.466187 176.660278 180.642792 201.173248 202.656052 222.940445 208.417557 200.629028 212.12355 220.97464 230.452652 230.869934 234.777374 251.118286 248.6287991 270.382385 284.365601 301.303192 281.920013 331.619995 334 2816.290039 2901.52002 2913.97998 2711.73999 2760.169922 2506.850098 2704.100098 2784.48999 2834.399902 2945.830078 2752.060059 2941.76001 2980.379883 2926.459961 2976.73999 3037.560059 3140.97998 3230.780029 3225.52002 2954.219971 2584.590088 2912.429932) 3044.310059 3100.290039 3271.120117 3500.310059 3363 3269.959961 49 50 51 52 53 54 55 56 57 58 59 60 61 62_ 1) (10 points) Compute the annual Beta of Microsoft (use two decimals only). Use the annual log-return for your analysis. What is the interpretation of the Beta you just computed? 2) (2 points) Plot the trendline (Characteristic line) 3) (2 points) Compute the return on the market portfolio. 4) (2 points) Compute the required rate of return (i.e. log-return on equity, r.). Use two decimals. 5) (4 points) Compute the WACC (round it to the closest integer). A B 34 35 36 37 38 39 40 41 The first part of this assignment asks you to estimate the weighted average cost of capital (WACC) for Microsoft Corporation. As a starting point, use the "MSFT.xlsx" file I created (which you will find as attachment on Digiex). Assume that Microsoft's optimal debt ratio is 40%, tax rate is 30% and its cost of debt is 6%. 42 43 44 45 46 47 48 In your calculation of the required rate of return (i.e. return on equity) using the CAPM formula, assume the risk-free rate to be 3%. 01/08/19 01/09/19 01/10/19 01/11/19 01/12/19 01/01/20 01/02/20 01/03/20 01/04/20 01/05/20 01/06/20 01/07/20 01/08/20 01/09/20 01/10/20 01/11/20 01/12/20 01/01/21 01/02/21 01/03/21 01/04/21 01/05/21 01/06/21 01/07/21 01/08/21 01/09/21 01/10/21 01/11/21 134.620514 136.215118 140.467209 148.315048 155.032852 167.350937 159.269958 155.466187 176.660278 180.642792 201.173248 202.656052 222.940445 208.417557 200.629028 212.12355 220.97464 230.452652 230.869934 234.777374 251.118286 248.6287991 270.382385 284.365601 301.303192 281.920013 331.619995 334 2816.290039 2901.52002 2913.97998 2711.73999 2760.169922 2506.850098 2704.100098 2784.48999 2834.399902 2945.830078 2752.060059 2941.76001 2980.379883 2926.459961 2976.73999 3037.560059 3140.97998 3230.780029 3225.52002 2954.219971 2584.590088 2912.429932) 3044.310059 3100.290039 3271.120117 3500.310059 3363 3269.959961 49 50 51 52 53 54 55 56 57 58 59 60 61 62_ 1) (10 points) Compute the annual Beta of Microsoft (use two decimals only). Use the annual log-return for your analysis. What is the interpretation of the Beta you just computed? 2) (2 points) Plot the trendline (Characteristic line) 3) (2 points) Compute the return on the market portfolio. 4) (2 points) Compute the required rate of return (i.e. log-return on equity, r.). Use two decimals. 5) (4 points) Compute the WACC (round it to the closest integer)
