Only need answer E. Please show excel formula.

E. Suppose that Gao will not issue new equity and will continue to use the same target capital structure, what is the companys WACC? e. Suppose Gao is evaluating three projects with the following characteristics.

a) Each project has a cost of $1 million. They will all be financed using the target mix of long-term debt, preferred stock, and common equity. The cost of the common equity for each project should be based on the beta estimated for the project. All equity will come from reinvested earnings.

b) Equity invested in Project A would have a beta of 0.5 and an expected return of 9.0%.

c) Equity invested in Project B would have a beta of 1.0 and an expected return of 10.0%.

d) Equity invested in Project C would have a beta of 2.0 and an expected return of 11.0%.

Analyze the companys situation, and explain why each project should be accepted or rejected

These are the correct answers but I need excel formula (f(x) function).

2 INPUTS USED IN THE MODEL 4 P $50.00 $30.00 5 Net Ppf 6 D $3.30 $2.10 8 g 9 B-Tra 10 Skye's beta 0.83 6.0% 11 Market risk premium, RPM 6.5% 12 Risk free rate, rRF 13 Target capital structure from debt 14 Target capital structure from preferred stoi 15 Target capital structure from common stoc 50% 16 Tax rate 15% 10% 17 Flotation cost for common 19 a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). Use both the the CAPM 20 method and the dividend growth approach to find the cost of equity. 22 Cost of debt 23 B-Tr A-Tr 24 25 10% 65% 6.50% 26 27 Cost of preferred stock (including flotation costs): 28 Net P 29 $30.00 30 $3.30 32 Cost of common equity, dividend growth approach (ignoring flotation costs): 33 $50.00 35 $2.25 7% 11.50% 36 37 Cost of common equity, CAPM 38 RP 39 40 6.5% 4.98% 11.48% 42 IMPORTANT NOTE: HERE THE CAPM AND THE DIVIDEND GROWTH METHODs PRODUCE 43 APPROXIMATELY THE SAME COST OF EQUITY. THAT OCCURRED BECAUSE WE USED A BETA IN THE 44 PROBLEM THAT FORCED THE SAME RESULT. ORDINARILY, THE TWO METHODS WILL PRODUCE 45 SOMEWHAT DIFFERENTRESULTS. 46 47 b. Calculate the cost of new stock using the dividend growth approach. 48 Dox (1 g) Pox (1 -F) 49 $45.00 50 $2.25 7% 52 c. What is the cost of new common stock based on the CAPM? (Hint: Find the difference between re and r 53 as determined by the dividend growth approach and add that differential to the CAPM value for rs.) r, Differential r 55