Prompt

Review the questions below and use the data provided in the question to solve the calculation. As you work through each equation, think about where the data for your company may be found to make the same calculations and how the information from these calculation can inform your recommendations for your final project. Use the non-graded discussion board in this module to ask questions of your peers to inform your responses to the questions below.

Note : I have alreadt the answered for Part1,2,3 in last question.

4. What is the estimated cost of common equity using the DCF approach?

Price	$50
Current dividend	$4.19
Constant growth rate	5%

Estimated Cost of Common Equity =

5. What is the bond-yield-plus-risk-premium estimate for XYZs cost of common equity?

"Bond yield + RP" premium	4%
market interest rate on XYZs debt	10%

Bond-yield-plus-risk-premium estimate =

6. What is your final estimate for r_s?

METHOD	ESTIMATE
CAPM	14.20%
DCF	13.80%
rd + RP	14.00%

Estimate =

7. XYZ estimates that if it issues new common stock, the flotation cost will be 15%. XYZ incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, considering the flotation cost?

% Flotation cost		15%
Net proceeds after flotation		$42.50

Cost of Newly Issued Common Stock

8. What is XYZs overall, or weighted average, cost of capital (WACC)? Ignore flotation costs.

wd	30%	rd (1 T)	6.00%
wp	10%	rp	9.00%
wc	60%	rs	14.00%

4. What is the estimated cost of common equity using the DCF approach?

Price	$50
Current dividend	$4.19
Constant growth rate	5%

Estimated Cost of Common Equity =

5. What is the bond-yield-plus-risk-premium estimate for XYZs cost of common equity?

"Bond yield + RP" premium	4%
market interest rate on XYZs debt	10%

Bond-yield-plus-risk-premium estimate =

6. What is your final estimate for r_s?

METHOD	ESTIMATE
CAPM	14.20%
DCF	13.80%
rd + RP	14.00%

Estimate =

7. XYZ estimates that if it issues new common stock, the flotation cost will be 15%. XYZ incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, considering the flotation cost?

% Flotation cost		15%
Net proceeds after flotation		$42.50

Cost of Newly Issued Common Stock

8. What is XYZs overall, or weighted average, cost of capital (WACC)? Ignore flotation costs.

wd	30%	rd (1 T)	6.00%
wp	10%	rp	9.00%
wc	60%	rs	14.00%