Compute the Cost of Capital in the spreadsheet below using the technique in this weeks lecture. Copy
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Question:
- Compute the Cost of Capital in the spreadsheet below using the technique in this weeks lecture. Copy and post to a NEW Excel spreadsheet your computed CoC.
- Copy and paste two (2) copies of your computed CoC on the SAME spreadsheet.
- On one copy, change the debt input. You may try to pay off a bond; buy back and reissue, etc. What effect does this have on the WACC? Does it help or increase the WACC? How did you buy/payoff (retained earnings?) what happened to the WACC
- On the other /2nd copy, change equity. You may buy back stock (common and or preferred) or use equity to fund a project (explain what project and $$). What effect did these changes have? Explain the effects.
- Is it better to change debt only, equity only, or both; recognizing that the use of $$ retained earnings affects both.
DEBT Catigory | DEBT Amount | Weight | Interest % | Weighted Cost |
Long-Term Debt | ||||
1990 Bond | $ 35,000,000.00 | 8.25% | ||
1998 Bond | $ 15,000,000.00 | 7.90% | ||
2007 Bond | $ 27,000,000.00 | 11.00% | ||
2011Bond | $ 17,550,000.00 | 9.00% | ||
WACD | ||||
Equity | ||||
Preferred Stock | $ 11,560,000.00 | 9.00% | ||
Common Stock | $ 25,005,000.00 | 6.00% | ||
Retained Earnings | $ 55,000,000.00 | 10.50% | ||
WACC | ||||
TotalDebt/Equity | $ 91,565,000.00 | |||
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