A B C D 1 Assignment Question Q1 2 3 Answers to the questions below will be found by closely examining the case. Detective work is required. 4 If you uncover ambiguity (more than one possibility), mention both. 5 6 COMPUTE WEIGHTED AVERAGE COST OF CAPITAL 7 Formula Equation 8 COST OF DEBT 9 Coupon Rate 7.25% given 10 Marginal Tax Rate 10.0% given 11 Cost of Debt 4.35% b5*(1-b6) k-d = 1 x (1-t) 12 Weight of debt 18% given d : dte 13 14 COST OF EQUITY 15 Risk-Free Rate 3.70% given 16 Equity Risk Premium 5.00% given R-m - R-f 17 Beta 1.20 given 18 Cost of Equity 9.72% b11+(b13* b12) ke = R-f+ [G x (R-m - R-f)] 19 Weight of equity 82% 1-b8 e + dte 20 21 Weighted-Average Cost of Capital 8.75% (b8*b7)+(b15*b14) (k-d x wt-d)+(k-ex wt-e) 22 23 Q1. Find the sources of the numbers entered in B9, B10, and B12 and list them. 24 25 26 27 28 29 30 31 Q1b. Find the sources of the numbers entered in B15, B16, and B17 and list them. 32 HINT: Case Exhibit 4 lists, among other information, betas for three peers of Flash Memory. 33 B15 is assumed, but explain what CFW says about the foibles of the 'risk premium', AKA 'equity risk premium'. 34 35 36 37 38 39 40 41