Excel Online Structured Activity: WACC Estimation

below, is considered to be optimal. Assume that there is no short$-$term debt.

and an expected constant growth rate of $8\%.($The next expected dividend is $$1\mathrm{.}20,$ so $$\frac{1\mathrm{.}20}{\text{\$}}30=4\%.)$ The marginal corporate tax rate is $35\%.$

The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.

Open spreadsheet

Round your answer to the nearest dollar. Do not round intermediate calculations.

$

round intermediate calculations.

$\%$

c$.$ Suppose now that there is not enough internal cash flow and the firm must issue new shares of stock. Qualitatively speaking, what will happen to the WACC?

I. $r_5$ will increase and the WACC will decrease due to the flotation costs of new equity.

II$.r_5$ will decrease and the WACC will increase due to the flotation costs of new equity.

III. $r_s$ and the WACC will not be affected by flotation costs of new equity.

IV$.r_s$ and the WACC will increase due to the flotation costs of new equity.

v$.r_5$ and the WACC will decrease due to the flotation costs of new equity.

Show answer and calculations in Excel.