Capital structure To complete this segment, refer to the following financial information of GM, as of 31th December 2022. There are 1.454 billion shares outstanding. Short-term and long-term debt amounts are $38,778 millions and $75,921 millions, respectively. Last closing share price is $33.64. Depreciation & amortization expenses are $11,276 millions. Earnings before interest and taxes are $10,314 millions. Marginal tax rate is 21% and the effective tax rate is 14.75%. Government bond yield is 5%.

2. Using the Capital Structure Excel spreadsheet template, answer the following questions.

Include all necessary workings in the spreadsheet (a) What is the WACC under the optimal capital structure suggested by the Excel spreadsheet analysis? Your answer is the baseline WACC figure. (b) In your baseline scenario, the expected market risk premium (MRP) is 7% and the government bond yield is 5%. However, you believe the MRP can be as 12% or as low as 5%. You also believe that the government bond yield can range from 2% to 7%. Analyze how sensitive the WACC is to your assumptions of the MRP (in increments of 0.5%) and the government bond yield (in increments of 1%). Provide a screenshot of your sensitivity analysis in the report. (c) Find the highest and lowest WACCs contained in your sensitivity analysis. To derive a WACC that better accounts for extreme scenarios, you decide to assign the following probability weights: Highest (20%); Baseline (70%); Lowest (10%). Find the probability-weighted average WACC. Clearly show your workings.