Struggling With Trying To Answer This Assignment; I'm Not Clear On How Question 3 & 4 Are Supposed To Be Answered, Would Be A Great Help To Have It Broken Down And Explained. Please & Thank You!

https://docs.google.com/spreadsheets/d/1JK0xmAPR0Ph6VTIVph3B0rk2FP1W4BLx5jZgbTQwUCo/edit?usp=sharing

3. Cristina Flores is an advisor to a board member who works at a private equity firm.She has told the CFO that sophisticated investors use a quick estimate of the cost of equity.She says that the cost of equity must logically be higher than the company's debt rate.The estimate is that 3% to 5% should be added to the company's long term interest rates. McCormick & Company estimates its current borrowing cost at 4%.Make your own estimate of the relative risk of McCormick & Company.Then, calculate the cost of equity (Rs) using this "own debt plus 3% to 5%" formula.

4. Calculate the Weighted Average Cost of Capital (WACC) for McCormick and Company using the formula WACC = (WD x RDx (1-T)) + (WSxRs)

Note that --

Rs = the cost of equity

Rd = the cost of debt

T = the tax rate

WD = Value of debt / (Value of debt plus value of equity)

WS = Value of equity/ (Value of debt plus value of equity)**Note that the weight of debt plus the weight of equity must total to 100%, as there are only two components in the capital structure.**

In order to estimate the weights of debt and equity in the total capital structure, the CFO suggests using the book value of debt and the market value of equity.To determine the book value of debt, use data from the year end November 2019 McCormick 10-K.Look on the Balance sheet and add the following -- Short term borrowings, Current portion of long term debt, and Long term debt.To determine the market value of equity, use the following data:On March 17, 2020 the market value of equity (or "Market Cap") for McCormick (MKC ) - as found on Yahoo finance - was $18.42 billion.Use 4% for the cost of debt.Use 27.5% as the tax rate - an estimate of the combination of federal and state income tax rates.Make your own best estimate of the cost of equity based on your work in questions 1, 2, and 3.