Using spreadsheets to solve complex problems is a key competence - in fact a requirement for many middle management positions in the workplace. Corporate finance provides many opportunities to use MS Excel to solve problems that cannot easily be solved manually. In this assignment, you will be applying the basic calculation tools to analyze the cost of capital for a corporation and apply calculate the weighted average cost of capital Instructions: 1. Use the scenario below to answer the questions. 2. Use MS Excel or the BA II plus calculator for calculations. Use MS Excel spreadsheets for charts and to summarize your data 3. Submit your report in either Word or MS Excel format If using Word, attach supporting Excel documents to the D2L assignment tool. Given the following information for McCumber Energy: Debt 7,0006-percent coupon bonds outstanding, $1,000 par value, 25 years to maturity selling for 106 percent of par, the bonds make semi-annual payments Preferred shares 15,000 shares paying a dividend of $3.65 per preferred shares outstanding currently selling at $72 per share Common shares - 300,000 common shares outstanding, selling at $55 per share. McCumber Corporate Tax Rate: 35% Table 1 - Market data: a) Calculate the average Risk-free rate (Rt), Return from the market (Rm) and beta () from data collected in the last ten years in Table 1. b) Calculate the market value of each component of the capital structure of the company. c) Calculate the cost of debt, cost of preferred shares and cost of common shares. Note: Use CAPM for the cost of common shares using your averages for R1,Rm and Beta d) Calculate the weighted average cost of capital (WACC) for McCumber Energy Question 3: (10 marks) Using spreadsheets to solve complex problems is a key competence - in fact a requirement for many middle management positions in the workplace. Corporate finance provides many opportunities to use MS Excel to solve problems that cannot easily be solved manually. In this assignment, you will be applying the basic calculation tools to analyze the cost of capital for a corporation and apply calculate the weighted average cost of capital Instructions: 1. Use the scenario below to answer the questions. 2. Use MS Excel or the BA II plus calculator for calculations. Use MS Excel spreadsheets for charts and to summarize your data 3. Submit your report in either Word or MS Excel format If using Word, attach supporting Excel documents to the D2L assignment tool. Given the following information for McCumber Energy: Debt 7,0006-percent coupon bonds outstanding, $1,000 par value, 25 years to maturity selling for 106 percent of par, the bonds make semi-annual payments Preferred shares 15,000 shares paying a dividend of $3.65 per preferred shares outstanding currently selling at $72 per share Common shares - 300,000 common shares outstanding, selling at $55 per share. McCumber Corporate Tax Rate: 35% Table 1 - Market data: a) Calculate the average Risk-free rate (Rt), Return from the market (Rm) and beta () from data collected in the last ten years in Table 1. b) Calculate the market value of each component of the capital structure of the company. c) Calculate the cost of debt, cost of preferred shares and cost of common shares. Note: Use CAPM for the cost of common shares using your averages for R1,Rm and Beta d) Calculate the weighted average cost of capital (WACC) for McCumber Energy Question 3: (10 marks)
