The U.S. Treasury yield curve currently shows a 2-year yield of 0.14% and a 10-year yield of 0.76%.

The 2-year credit spread for BBB bonds is 0.70%, and the 10-year credit spread for BBB bonds is 1.76%.

Dunder Mifflin's bond rating has recently been updated by S&P and it stands on "BBB".

In 2002, Dunder Mifflin issued 20-year coupon bonds with a coupon rate of 6.7%. Right now (in 2020), these bonds have two years to maturity and their yield to maturity is 0.95%.

a) You were asked by your boss to value Dunder Mifflin's stock. What would be a reasonable number to use for Dunder Mifflin 's cost of debt for the purpose of stock valuation? Explain your answer.

b) Dunder Mifflin is interested in doing some additional short term borrowing (with maturity of about 2 years). What do you think is a reasonable rate at which the firm could borrow? Explain your answer.

Please solve in Excel and include formula text. Thanks!