just question 2. not 1-a

a. C. 2. Cost of Capital and Optimal Capital Structure In addition to the 2020 SEC 10K report, for this part you will need Yahoo Finance and/or information from other financial services of your choice. Using balance sheet book value of long-term debt and stockholders' equity, calculate TTC's capital structure for E/V and D/V for the past two years. b. Recalculate E/V and D/V using TTC's current market capitalization of stock in place of the book value of stockholders' equity employed in part a. Review the bond ratings and market yields to maturity of TTC's bonds from FINRA to estimate an approximate (long-term) Rp in the current financial market environment. d. Estimate TTC's required return on equity (i.e. Re) using the dividend discount model (i.e. D/P + g). You will need a dividend yield (e.g. Yahoo Finance) and an approximate growth rate. Analysts believe that TTC's recent rapid historical growth rates of DPS and EPS will remain strong but naturally slow down somewhat going forward to around 8% per year. Estimate TTC's required return on equity using the CAPM. Note that it is a good idea to get multiple perspectives on beta. The market risk premium is normally around 6%-7%, but be aware that the risk-free rate is unsustainably low if measured by the 10-year US Treasury yield in today's market. Bloomberg uses the currently low 10-year US Treasury yield as the risk-free rate, but then applies a market risk premium of about 9%. f. Using your judgment based on finance concepts and the information in parts d and e above, provide and justify a reasonable range for Re. g. Put all the information from parts a-f above into calculations for a fair range of TTC's WACC and briefly explain your results in terms of whether these WACC rates fairly capture TTC's risk profile from your analysis in Parts 1 and 2 thus far. h. Provide brief commentary and justification based on your overall analysis of whether you believe that TTC's capital structure of debt versus equity weights is fairly "optimal. e. An equity analyst is evaluating historical financial performance and risk analysis as the first steps to performing a comprehensive valuation assessment for the intrinsic value of the stock for The Toro Company (NYSE: TTC). TTC is a manufacturer and distributor of turf maintenance and irrigation equipment. The analyst has just finished evaluating TTC's long term growth history for over ten years. The compound growth rate of EPS has averaged about 7% per year and DPS compound growth of 8% per year. In fiscal year 2019, there was a significant acquisition that resulted in year over year revenue growth of 30%, but top line revenue growth was slower at about 3% per year for the prior decade. Another acquisition in 2020 has generated additional revenue growth and profitability. As of FY 2020, TTC's top line revenue was nearly $3.4B with net income around $330M. Next steps involve an evaluation of risk from various perspectives from the financial statements and then estimation of TTC's weighted average cost of capital using market data in combination with the background risk analysis from the financial statements. 1. Risk Analysis using Financial Statements Source should be the 2020 SEC 10K report. You will need information from the income statement, balance sheet and statement of cash flows. a. Calculate the following ratios for the past two fiscal years: Liquidity - current ratio & quick ratio Asset Management - inventory turnover, days sales, fixed asset turn., total asset turnover Solvency - total debt, debt to equity, long-term debt, assets to equity, times interest earned Profitability - net profit margin, return on assets, return on equity - Sustainable growth requires RF and retention ratelieb a. C. 2. Cost of Capital and Optimal Capital Structure In addition to the 2020 SEC 10K report, for this part you will need Yahoo Finance and/or information from other financial services of your choice. Using balance sheet book value of long-term debt and stockholders' equity, calculate TTC's capital structure for E/V and D/V for the past two years. b. Recalculate E/V and D/V using TTC's current market capitalization of stock in place of the book value of stockholders' equity employed in part a. Review the bond ratings and market yields to maturity of TTC's bonds from FINRA to estimate an approximate (long-term) Rp in the current financial market environment. d. Estimate TTC's required return on equity (i.e. Re) using the dividend discount model (i.e. D/P + g). You will need a dividend yield (e.g. Yahoo Finance) and an approximate growth rate. Analysts believe that TTC's recent rapid historical growth rates of DPS and EPS will remain strong but naturally slow down somewhat going forward to around 8% per year. Estimate TTC's required return on equity using the CAPM. Note that it is a good idea to get multiple perspectives on beta. The market risk premium is normally around 6%-7%, but be aware that the risk-free rate is unsustainably low if measured by the 10-year US Treasury yield in today's market. Bloomberg uses the currently low 10-year US Treasury yield as the risk-free rate, but then applies a market risk premium of about 9%. f. Using your judgment based on finance concepts and the information in parts d and e above, provide and justify a reasonable range for Re. g. Put all the information from parts a-f above into calculations for a fair range of TTC's WACC and briefly explain your results in terms of whether these WACC rates fairly capture TTC's risk profile from your analysis in Parts 1 and 2 thus far. h. Provide brief commentary and justification based on your overall analysis of whether you believe that TTC's capital structure of debt versus equity weights is fairly "optimal. e. An equity analyst is evaluating historical financial performance and risk analysis as the first steps to performing a comprehensive valuation assessment for the intrinsic value of the stock for The Toro Company (NYSE: TTC). TTC is a manufacturer and distributor of turf maintenance and irrigation equipment. The analyst has just finished evaluating TTC's long term growth history for over ten years. The compound growth rate of EPS has averaged about 7% per year and DPS compound growth of 8% per year. In fiscal year 2019, there was a significant acquisition that resulted in year over year revenue growth of 30%, but top line revenue growth was slower at about 3% per year for the prior decade. Another acquisition in 2020 has generated additional revenue growth and profitability. As of FY 2020, TTC's top line revenue was nearly $3.4B with net income around $330M. Next steps involve an evaluation of risk from various perspectives from the financial statements and then estimation of TTC's weighted average cost of capital using market data in combination with the background risk analysis from the financial statements. 1. Risk Analysis using Financial Statements Source should be the 2020 SEC 10K report. You will need information from the income statement, balance sheet and statement of cash flows. a. Calculate the following ratios for the past two fiscal years: Liquidity - current ratio & quick ratio Asset Management - inventory turnover, days sales, fixed asset turn., total asset turnover Solvency - total debt, debt to equity, long-term debt, assets to equity, times interest earned Profitability - net profit margin, return on assets, return on equity - Sustainable growth requires RF and retention ratelieb