Applied Corporate Finance

You are to solve all these problems in MS Excel and submit the excel sheets as answers. You are to solve the problems using formulae and additionally use Excel Functions to compute the answers. So you are going to have two answers on your excel sheet: one computed using formulas, the other computed through excel functions. Example: if you take an average of 5 numbers, you add them together and divide by 5 to calculate average. That's formula. You also use the Average() function on Excel to calculate the average. That way you can also double check your answers. 1. Braxton Company's long-term debt yields 12%. It could sell preferred stock with an $8 annual dividend for $80, but flotation costs would be 5%. The firm's beta is 1.1, the risk- free rate is 7%, and the required rate of return on the market is 12%. Braxton's next dividend is estimated to be $2.00, and it is growing at a constant rate of 4%. The firm's stock is selling for $25 per share. Its estimate of the risk premium for stocks versus bonds is 1%. Braxton's target capital structure is 30% debt, 10% preferred stock, and 60% common stock. The firm expects $50,000 in retained earnings and must incur flotation costs of 10% on new common stock sales. Its tax rate is 40%. a. What is Braxton's after tax cost of debt? b. What is their cost of preferred stock? c. What is the firm's cost of retained earnings? (Use all three methods.) d. What is the firm's WACC after tax