Using the data below, please answer the sub-questions. Thanks!
ANSWER ALL QUESTIONS IN THE YELLOW BOXES IN THE CORRECT FORM. 4 decimals for returns and dollars for dollar answers: 5.46% or.0546 OR $11,245) 1. You have been assigned to estimate the cost of capital of Starbucks Inc. Information about Starbuck's common stock Current Stock Price $ 90.50 Dividend in time 0 Expected growth in dividends per year 2.00% Beta Starbucks is a large company with well diversified investors. $2.20 1.00 $ Information about Starbuck's bonds Current bond price expressed as Maturity date Starbucks' bonds are US corporate bonds 103.00 Coupon rate 2050 Underwriter fee 3.00% 2.00% of price to issue bonds Additional Information: Starbucks weight on debt Risk free rate Starbucks has no preferred stock Tax rate 20.00% Starbucks weight on common stock 1.30% Market risk premium 21% 80.00% 6.00% Use the above information to answer the following questions: a. What is the cost of common stock using retained earnings and the constant growth model? b. What is the cost of common stock using the CAPM model? c. What are the Net Proceeds of the bond issue? Optional: You can calculate intermediate steps below for the bonds: coupon payment price of bond number of periods d. Given the underwriter fees and other information above, what is the cost of debt for Starbucks? e. What is the weighted average cost of capital of Starbucks given the information given? ANSWER ALL QUESTIONS IN THE YELLOW BOXES IN THE CORRECT FORM. 4 decimals for returns and dollars for dollar answers: 5.46% or.0546 OR $11,245) 1. You have been assigned to estimate the cost of capital of Starbucks Inc. Information about Starbuck's common stock Current Stock Price $ 90.50 Dividend in time 0 Expected growth in dividends per year 2.00% Beta Starbucks is a large company with well diversified investors. $2.20 1.00 $ Information about Starbuck's bonds Current bond price expressed as Maturity date Starbucks' bonds are US corporate bonds 103.00 Coupon rate 2050 Underwriter fee 3.00% 2.00% of price to issue bonds Additional Information: Starbucks weight on debt Risk free rate Starbucks has no preferred stock Tax rate 20.00% Starbucks weight on common stock 1.30% Market risk premium 21% 80.00% 6.00% Use the above information to answer the following questions: a. What is the cost of common stock using retained earnings and the constant growth model? b. What is the cost of common stock using the CAPM model? c. What are the Net Proceeds of the bond issue? Optional: You can calculate intermediate steps below for the bonds: coupon payment price of bond number of periods d. Given the underwriter fees and other information above, what is the cost of debt for Starbucks? e. What is the weighted average cost of capital of Starbucks given the information given
