Excel Activity: Calculating the WACC Here is the condensed 2021 balance sheet for Skye Computer Company (in thousands of dollars): Current assets Net fixed assets Total assets Accounts payable and accruals Short-term debt Long-term debt Preferred stock (15,000 shares) Common stock (50,000 shares) Retained earnings Total common equity Total liabilities and equity 2021 $1,750 3,250 $5,000 $ 900 100 1,025 325 1,300 1,350 $2,650 $5,000 Skye's earnings per share last year were $2.15. The common stock sells for $55.00, last year's dividend (Do) was $1.45, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 10%. Skye's preferred stock pays a dividend of $2.25 per share, and its preferred stock sells for $25.00 per share. The firm's before-tax cost of debt is 10%, and its marginal tax rate is 25%. The firm's currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 6%, the risk-free rate is 7%, and Skye's beta is 1.802. The firm's total debt, which is the sum of the company's short-term debt and long-term debt, equals $1.125 million. The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. Round your answers to two decimal places.

Excel Activity: Calculating the WACC Here is the condensed 2021 balance shent for Skye Computer Compamy (in thousands of dollars): rotal deht, whish is the sum of the compory's shout-term debt and long-tecm debr, equals $1,125 milliun. intemediale calculations. Pound your ancwers to two decinal places. a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newly issued common stock. Use the DCF method to find the cost of common equity. After-tax cost of debt: % Cost of preferred stock: \% Cost of retained earnings: % Cost of new common stock: % b. Now calcutate the cost of cornmon equiry from rotained earnings, using the CAPM method. C. What is the cost of new common stock bused on the CAPM? (Hint; Fnd the difference between ref and r1 as determined by the DCF method, and add that differential to the CAPM value for rs ) d. If Skye continues to use the same market-value capital structure, what is the firn's WACC assuming that ( 1 ) it uses only retained earnings for eguity and ( 2 ) if if expands so rapedly that it must issue new common stock? (Hint: Use the makket value capital structure excludisg current habilities to determine the weights. Atso, usi ther simpte average of the required vatues obtained under the two nethods in calculating WAcC.) WACC 1 : os whec: a. Calculating the cost of each capital component fusing the DCF method to find the cost of common equity) b. Calculating the cost of common equitu from retainad earnings, using the CAPM method Cont of ret airied earnings c. Calculating the cost of nev common stock based on the CAPM Flotvion cost bdiustment Cost of riev eortimon siock d. Calculating the firm's WACC assuming that (1) it uses only tetained earnings for equity and I 21 if it acnind