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The new Designer Shoes was expected to sell for $ 104 per unit and had projected sales of 4700 units in the first year, with

The new Designer Shoes was expected to sell for $ 104 per unit and had projected sales of 4700 units in the first year, with a projected (Most-Likely scenario) 15.0 % growth rate per year for subsequent years. A total investment of $ 956,000 for new equipment was required. The equipment had fixed maintenance contracts of $ 280,612 per year with a salvage value of $ 123,174 and variable costs were 8 % of revenues. Balky also needed to consider both the Best-Case and Worst-Case scenarios in the analysis with growth rates of 25.00 % and 1.50 % respectively. The new equipment would be depreciated to zero using straight line depreciation. The new project required an increase in working capital of $ 128,520 and $ 21,848 of this increase would be offset with accounts payable.

PSUWC currently has 1178000 shares of stock outstanding at a current price of $ 76.00. Even though the company has outstanding stock, it is not publicly traded and therefore there is no publicly available financial information. However, after analysis management believes that its equity beta is 1.04.

The company also has 125000 bonds outstanding, with a current price of $ 1,032.00. The bonds pay interest semi-annually at a coupon rate of 5.10 %. The bonds have a par value of $1,000 and will mature in 14 years. The average corporate tax rate was 39 %.

Management believes the S&P 500 is a reasonable proxy for the market portfolio. Therefore, the cost of equity is calculated using the company's equity beta and the market risk premium based on the S&P 500 annual expected rate of return - Balky would calculate the monthly expected market return using 5 years of past monthly price data available in the worksheet Marketdata. This would then be multiplied by 12 to estimate the annual expected rate. Balky remembered that if the expected rate of return for the market was too low, too high, or negative, a forward looking rate of an historical average of about 9.5% would have to be used, as the calculated value for the current 5-year period may not be representative of the future. Balky would consider a E(Rm) between 8-12% acceptable. Balky would calculate the market risk premium: E(Rm) - Rf from the previous calculations using the risk-free rate data available in the worksheet Marketdata. Balky noted that the risk-free rate was on an annual basis.

Fill in the blanks. Answer all questions or I will downvote.

Market Value of Equity $ 89,528,000.00
Market Value of Debt $ 129,000,000.00
Total Market Value $ 218,528,000.00
Weight of Equity 40.97%
Weight of Debt 59.03%
E(Rm)
Rf 3.0%
b 1.04
Cost of Equity (re)
Cost of Debt (rd)
After-Tax Cost of Debt
WACC

Market Data

S&P 500 Closing Data
Date Adjusted Close
12/1/2021 5579.17
11/1/2021 5499.74
10/1/2021 5446.14
9/1/2021 5468.05
8/1/2021 5512.62
7/1/2021 5523.01
6/1/2021 5506.37
5/1/2021 5591.67
4/1/2021 5553.66
3/1/2021 5505.94
2/1/2021 5456.71
1/1/2021 5352.50
12/1/2020 5308.39
11/1/2020 5205.87
10/1/2020 5234.72
9/1/2020 5116.48
8/1/2020 4980.93
7/1/2020 4868.03
6/1/2020 4753.49
5/1/2020 4765.17
4/1/2020 4741.41
3/1/2020 4487.09
2/1/2020 4558.93
1/1/2020 4432.05
12/1/2019 4366.69
11/1/2019 4396.70
10/1/2019 4318.38
9/1/2019 4364.92
8/1/2019 4390.30
7/1/2019 4263.71
6/1/2019 4259.57
5/1/2019 4272.53
4/1/2019 4200.17
3/1/2019 4155.09
2/1/2019 4063.07
1/1/2019 4118.57
12/1/2018 4136.95
11/1/2018 4092.12
10/1/2018 3973.75
9/1/2018 3957.08
8/1/2018 3864.84
7/1/2018 3922.14
6/1/2018 3849.51
5/1/2018 3863.11
4/1/2018 3837.32
3/1/2018 3795.49
2/1/2018 3794.01
1/1/2018 3727.46
12/1/2017 3667.89
11/1/2017 3558.62
10/1/2017 3555.23
9/1/2017 3480.74
8/1/2017 3398.68
7/1/2017 3406.39
6/1/2017 3437.38
5/1/2017 3424.94
4/1/2017 3379.40
3/1/2017 3327.73
2/1/2017 3300.41
1/1/2017 3305.72
12/1/2016 3232.00
Company beta = 1.04
Risk Free Rate (Rf) = 3.00%

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