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You are given the task of coming up with a cost of capital for Starbucks, a multinational chain of coffeehouses, and using that cost of

You are given the task of coming up with a cost of capital for Starbucks, a multinational chain of coffeehouses, and using that cost of capital to do some calculations. Weekly return data for the past two years are in the spreadsheet, in rows 21 to 125 of the "PART 5" tab. These historical data include Starbucks stock price, Starbucks equity return, the S&P 500 return (a proxy for the total market), and a measure of the risk-free return.
Here are some relevant facts:
Please assume that Starbucks faces a tax rate of 21 percent. It has a capital structure that includes both equity ( $70 billion) and debt ( $30 billion), with no excess cash on the balance sheet. You are welcome to assume that Starbucks has a "debt beta" of zero, and Starbucks' credit profile is consistent with borrowing at a pre-tax rate that is the same as the risk-free rate. Now the risk-free rate of return is 5 percent, and the market return is 10 percent.
Questions:
A. Based on the historical data above, what is the implied "systematic risk" (measured by the "beta") of Starbucks equity? (10 points)
B. What is the weekly volatility (standard deviation) of Starbucks equity excess return over the past two years? (10 points)
C. What is the weekly Sharpe ratio of Starbucks equity return? (Sharpe ratio ?i=ERi-Rmi, use geometric mean when taking expectation)(10 points)
D. Based on this equity beta estimate, what is your estimate of the "asset beta" for Starbucks? (10 points)
E. What is the after-tax cost of debt? (10 points)
F. What is the estimated cost of equity using CAPM model? (10 points)
G. What is the after-tax weighted average cost of capital of this business at the leverage? (10 points)
H. Suppose that the business generated free cash flows of $3.5 billion in the most recent year, and is growing at a stable rate. This value, together with the WACC estimated above and the current value of the company's securities outstanding, imply that growth rate. What is that growth rate? (please answer to the nearest hundredth of a percent)(10 points).
Do it in excel please!
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