Question
. Create a sheet in your Excel file that estimates the weighted average cost of capital, listing the necessary inputs at the top of your
. Create a sheet in your Excel file that estimates the weighted average cost of capital, listing the necessary inputs at the top of your sheet. Obtain any necessary data from the sources listed above. Link to other sheets in your file that will calculate Boeings cost of equity and beta. 2. Create a second sheet, where you use the capital asset pricing model to estimate Boeings cost of equity, assuming 3.5% risk-free rate and 5.5% market risk premium. Link to a separate sheet with beta estimation. 3. Create a third sheet, where you estimate Boeings beta, using historical prices with WEEKLY frequency for the most recent 5 YEARS. Use finance.yahoo.com to download the prices for BA and VFINX (make sure you use the ADJUSTED CLOSE price). Use the SLOPE function to estimate beta. Insert a scatter chart that shows the trendline from regressing returns of BA on the VFINX returns, displays the estimated equation, and the R-squared (check the boxes to display the equation and the R-squared). 4. In the context of your regression analysis shown on the chart, using the specific numbers that you estimated, a. Explain and interpret the meaning of the slope coefficient from the estimated equation. In addition, please discuss what your estimate implies about the risk of holding BA stock. b. Explain and interpret the meaning of the R-squared from the estimated equation. You may need to look up the meaning of the slope coefficient and of R-squared in a regression analysis if you are not familiar with regressions. Make sure your interpretation is specific to your variables and results. 5. Is Boeings cost of equity smaller or larger than Boeings cost of debt? Is that what we would expect? Explain your answer!
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