Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

parts a through d ? Excel Activity: Calculating the WACC Here is the condensed 2021 balance sheet for Skye Computer Company (in thousands of dollars):

image text in transcribed

parts a through d ?

image text in transcribed

Excel Activity: Calculating the WACC Here is the condensed 2021 balance sheet for Skye Computer Company (in thousands of dollars): \begin{tabular}{lr} & \multicolumn{1}{c}{2021} \\ \hline Current assets & $2,000 \\ Net fixed assets & 3,000 \\ \cline { 2 - 2 } Total assets & $5,000 \\ \hline Accounts payable and accruals & $800 \\ Short-term debt & 200 \\ Long-term debt & 1,600 \\ Preferred stock (10,000 shares) & 200 \\ Common stock (40,000 shares) & 1,075 \\ Retained earnings & 1,125 \\ Total common equity & $2,200 \\ Total liabilities and equity & $5,000 \\ \hline \end{tabular} premium is 4%, the risk-free rate is 5%, and Skye's beta is 1.324 . The firm's total debt, which is the sum of the company's short-term debt and long-term debt, equals $1.8 million. X bownload spreadsheet Calculating the WACC-97dd75.xlsx After-tax cost of debt: % Cost of preferred stock: % Cost of retained earnings: % Cost of new common stock: b. Now calculate the cost of common equity from retained earnings, using the CAPM method. c. What is the cost of new common stock based on the CAPM? (Hint: Find the difference between re and rs as determined by the DCF method, and add that differential to the CAPM value for rs.) %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions