C Financial Reporting, Financial IC Chegg Study l Guided solut Live TVISpectrum TV On homework-help/Financial Reporting-Financial-Statement-Analysis-and-valuation-8th-edition-chapter-11-problem-1C-soluti... Secure https:/ www.chegg.com E Chegg Study TEXTBOOK SOLUTIONS EXPERT Q&A EE Chapter 11, Problem 1c Show all steps: Q ON Bookrmark Chapter 1 Integrative Case 10.1 projected financial statements for Starbucks for Years +1 through +5. This Chapter 2 portion of the Starbucks Integrative Case applies the techniques of this chapter to compute Chapter 3 Starbucks' required rate of retum on equity and Starbucks' share value using the dividendsbased valuation model. This case also compares the value estimate to Starbucks' share price at the Chapter 4 time of the case development to provide an investment recommendation. Assume the market Chapter 5 equity beta for Starbucks at the end of 2012 was 0.75. Assume that the risk-free interest rate was 3.0% and the market risk premium was 6.0%. Starbucks had 749.3 million shares outstanding at Chapter 6 the end of 2012, and the share price was $50.15 Chapter 7 REQUIRED Chapter 8 a. Use the CAPM to compute the required rate of return on equity capital for Starbucks. b. Compute the weighted-average cost of capital for Starbucks as of the start of Year +1. At the Chapter 9 start of Year +1, Starbucks had $550 million in outstanding interest-bearing debt on the balance Chapter 10 sheet and no preferred stock. Assume that the balance sheet value of Starbucks' debt is approximately equal to the market value of the debt. Assume that at the start of Year +1 Chapter 11 Starbucks will incur interest expense of 6.25% on debt capital and that Starbucks' average tax 1C rate is 33.0% c. From your forecasts of Starbucks' financial statements for Years +1 through +5, derive the projected dividends using the projected amounts for the plug to dividends minus the net amounts of common stock issued each year (if any). Then compute projected dividends for Starbucks for Years +1 through +5 using the clean surplus accounting approach based on projected amounts for comprehensive income and common shareholders' equity. The projected amounts of dividends under the two approaches should be identical. d. Use the clean surplus accounting approach to project the continuing dividend in Year +6 Assume that the steady-state long-run growth rate will be 3% in Year +6 and beyond