Identify R_f. See Exhibit 4. Based on the data provided which do you think is the most appropriate R_f to use in the Capital Asset Pricing Model. Why?

You can assume that Market Risk Premium is 4.4%. Using the information above, calculate the cost of equity using the CAPM.

Cost of Equity =

Which did you use? Why?

When forecasting the WACC are you going to use the Cost of Equity from the DDM or CAPM? Why?

The Tax Cuts and Jobs Act reduces the top marginal tax rate for all corporations from 35% to 21% for next fiscal year. What is the forecasted WACC?

Show the formula and numbers that you used to solve WACC.

WACC = X

*This is all the data give in Exhibit 4:

Date 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr 10/1/2018 2.13 2.23 2.4 2.6 2.82 2.9 2.96 3.04 3.09 3.18 3.24