Ariel 10 ' ' General 2 Wiap Tort Merg & Center - Pache 1 - A - S - %) 12 Candita Format Clipboard Font Alignment Number AS 4 INPUTS USED IN THE MODEL 67 W + B D G H 61 Again, we would not normally find that the CAPM and dividend growth methods yield identical results. 672 63 d. Assuming that Gao will not issue now equity and will continue to use the same capital structure, what 64 is the company's WACC? 65 66 W 45 0% 5.0% 681 50.0% 69 100 0% 70 71 WAT+ Work W, WACC 72 73 74. Suppose Gao is evaluating three projects with the following characteristics 75 76 (1) Each project has a cost of 51 million. They will all be financed using the target mix of long term debt, preferred 77 stock, and common equity. The cost of the common equity for each project should be based on the beta estimated 78 the project. All equity will come from reinvented earnings. 79 80 (2) Equity invested in Project A would have a beta of 0.5. The project has an expected return of 9.0%. 81 82 (3) Equity Inverted in Project would have a beta of 1.0. The project has an expected return of 10.07% 83 84 (4) Equity Invested in Project C would have a beta of 2.0. The project has an expected return of 110%. 85 Anh thi mation and welain dan tolo che hanno Build a Model O a Type here to search hap % 2 3 4 5 6 & 7 8 3 Clipboard Font 5 Alignment Num AS X for INPUTS USED IN THE MODEL D E F 11/17 B 1 Student shelly stansbury 2 Chapter: 11 3 Problem: 18 4 5 INPUTS USED IN THE MODEL 6 7 PO 8 Net Ppt 9 Ppt 10 Do 11 g 12 B-T ra 13 Skye's beta 14 Market risk premium, RPM 15 Risk free rate, TRF 16 Target capital structure from debt 17 Target capital structure from preferred sto 18 Target capital structure from common sto 19 Tax rate 20 Flotation cost for common $50.00 $30.00 $3.30 $2.10 7% 10% 0.83 6.0% 6.5% 45% 5% 50% 35% 10% 24 File Home Draw Page Layout Formules Data Review Vw Arial 10 - A A EE General Wop lot Merge Center - Paste O-A- $ - % Condition for Formatting to Clipboard Font Alignment Number AS X INPUTS USED IN THE MODEL B C D G H 74 0. Suppose Gno is evaluating three projects with the following characteristics: 75 76 (0) Each project has a cost of $1 million. They will all be financed using the target mix of long term debt, preferred stock, and common equity. The cost of the common equity for each project should be based on the beta estimated for 78 the project. All equity will come from reinvested earnings 79 B0 (2) Equity invested in Project A would have a bela of 0.5. The project has an expected return of 9.0% 81 82 e Equity invested in Project 3 would have a beta of 1.0. The project has an expected return of 10.0% 83 84 (4) Equity invested in Project would have a beta of 20. The project has an expected return of 11.0% 85 85 Analyze the company's situation and explain why each project should be accepted or rejected. 87 Expected return on 89 Beta 13 raft WACC project 89 Project A 05 90 Project 91 Project 20 92 93 The expected returns on Projects A and B both exceed their risk-adjusted WACCS, so they should be accepted 94 However Project Cs WACC exceeds its expected rate of return, so it should be rejected. 95 96 97 10 Build Model > a * O ti 3 Type here to search hp $ 4 a % 5 8 6 7 2 4 3 Ariel 10 ' ' General 2 Wiap Tort Merg & Center - Pache 1 - A - S - %) 12 Candita Format Clipboard Font Alignment Number AS 4 INPUTS USED IN THE MODEL 67 W + B D G H 61 Again, we would not normally find that the CAPM and dividend growth methods yield identical results. 672 63 d. Assuming that Gao will not issue now equity and will continue to use the same capital structure, what 64 is the company's WACC? 65 66 W 45 0% 5.0% 681 50.0% 69 100 0% 70 71 WAT+ Work W, WACC 72 73 74. Suppose Gao is evaluating three projects with the following characteristics 75 76 (1) Each project has a cost of 51 million. They will all be financed using the target mix of long term debt, preferred 77 stock, and common equity. The cost of the common equity for each project should be based on the beta estimated 78 the project. All equity will come from reinvented earnings. 79 80 (2) Equity invested in Project A would have a beta of 0.5. The project has an expected return of 9.0%. 81 82 (3) Equity Inverted in Project would have a beta of 1.0. The project has an expected return of 10.07% 83 84 (4) Equity Invested in Project C would have a beta of 2.0. The project has an expected return of 110%. 85 Anh thi mation and welain dan tolo che hanno Build a Model O a Type here to search hap % 2 3 4 5 6 & 7 8 3 Clipboard Font 5 Alignment Num AS X for INPUTS USED IN THE MODEL D E F 11/17 B 1 Student shelly stansbury 2 Chapter: 11 3 Problem: 18 4 5 INPUTS USED IN THE MODEL 6 7 PO 8 Net Ppt 9 Ppt 10 Do 11 g 12 B-T ra 13 Skye's beta 14 Market risk premium, RPM 15 Risk free rate, TRF 16 Target capital structure from debt 17 Target capital structure from preferred sto 18 Target capital structure from common sto 19 Tax rate 20 Flotation cost for common $50.00 $30.00 $3.30 $2.10 7% 10% 0.83 6.0% 6.5% 45% 5% 50% 35% 10% 24 File Home Draw Page Layout Formules Data Review Vw Arial 10 - A A EE General Wop lot Merge Center - Paste O-A- $ - % Condition for Formatting to Clipboard Font Alignment Number AS X INPUTS USED IN THE MODEL B C D G H 74 0. Suppose Gno is evaluating three projects with the following characteristics: 75 76 (0) Each project has a cost of $1 million. They will all be financed using the target mix of long term debt, preferred stock, and common equity. The cost of the common equity for each project should be based on the beta estimated for 78 the project. All equity will come from reinvested earnings 79 B0 (2) Equity invested in Project A would have a bela of 0.5. The project has an expected return of 9.0% 81 82 e Equity invested in Project 3 would have a beta of 1.0. The project has an expected return of 10.0% 83 84 (4) Equity invested in Project would have a beta of 20. The project has an expected return of 11.0% 85 85 Analyze the company's situation and explain why each project should be accepted or rejected. 87 Expected return on 89 Beta 13 raft WACC project 89 Project A 05 90 Project 91 Project 20 92 93 The expected returns on Projects A and B both exceed their risk-adjusted WACCS, so they should be accepted 94 However Project Cs WACC exceeds its expected rate of return, so it should be rejected. 95 96 97 10 Build Model > a * O ti 3 Type here to search hp $ 4 a % 5 8 6 7 2 4 3