You have recently been hired by Hewlett Computer Ltd (HCL), in its relatively new corporate finance department. HCL was founded eight years ago by Bob Hewlett and currently operates 14 stores in the South Island of New Zealand. HCL is privately owned by Bob and his family, and had sales of $9.7 million last year. HCL. primarily sells to in-store customers who come to the store and talk with a sales representative. The sales representative assists the customer in determining the type of computer and peripherals that are necessary for the individual customer's computing needs. After the order is taken, the customer pays for the order immediately, and the computer is made to fill the order. Delivery of the computer averages 15 days, and it is guaranteed in 30 days. HCL's growth to date has been financed by its profits. When the company had sufficient capital, it would open a new store. Other than scouting locations, relatively little formal analysis has been used in its capital budgeting process. Bob has just read about capital budgeting techniques and has come to you for help. For starters, the company has never attempted to determine its cost of capital, and Bob would like you to perform the analysis. Since the company is privately owned, it is difficult to determine the cost of equity for the company. Bob wants you to use the pure play approach to estimating the cost of capital for HCL, and he has chosen Harvey Norman as a representative company Note: Most publicly traded corporations are required to submit half-yearly and annual reports to the ASX detailing the financial operations of the company over the past half-year or year, respectively. These reports are available on the ASX website at was.com.au or in the investor section of the company's own website. Go to the ASX website and search for announcements made by Harvey Norman. Find the most recent annual report or half-year report and download the report. Look on the balance sheet to find the book value of debt and the book value of equity. If you look in the report, you should find a section titled "Interest Rate Risk Management', which will provide a breakdown of Harvey Norman's long-term debt. Follow the steps below and answer the questions 1. General introduction and characteristics of this investment (10-year government bonds). To estimate the cost of equity for Harvey Norman, go to http://on.finance.boe.com plus the business section of www.cool.com.co and enter the ASX code for Haney Norman, HVN. Follow the various links to answer the following question: "What is the most recent stock price listed for Haney Norman? What is the market value of equity. or market capitalization? How many shares does Harvey Norman bare outstanding? What is the most recent annual diridend? Can you use the dividend discount model in this case? What is the beta for Haney Normant Now go back to luttp//adimasuabea.com and find the Bonds link. What is the yield on government debit Using the bistorical market risk pression, what is the cost of equity for Harvey Norman using the CAPM? 2. Yow now need to calculate the cost of delt for Haney Norman, Go to ...com.tr and find the current Business loan rates equivalent for each of Haney Norman's debuts. What is the sighted average cost of debt for Harvy Normen using the book value swights and the market value wrights? Does it make a difference in Mis otse if you use book-value weights or market value weights? 3. You now have all the necessary information to calenlate the weighted average cost of capital for Harvey Norman. Calemate the weighted average cost of capital for Harvey Norman asing book ralne wrights and market value wrights. Asume Haney Norman has a 30% tax rate. Which cost of capital number is more relevant 4. You used Harvey Norman as a pure play company to estimate the cost of capital for HCL. Are there any potential prolems with this approach in this situation? You have recently been hired by Hewlett Computer Ltd (HCL), in its relatively new corporate finance department. HCL was founded eight years ago by Bob Hewlett and currently operates 14 stores in the South Island of New Zealand. HCL is privately owned by Bob and his family, and had sales of $9.7 million last year. HCL. primarily sells to in-store customers who come to the store and talk with a sales representative. The sales representative assists the customer in determining the type of computer and peripherals that are necessary for the individual customer's computing needs. After the order is taken, the customer pays for the order immediately, and the computer is made to fill the order. Delivery of the computer averages 15 days, and it is guaranteed in 30 days. HCL's growth to date has been financed by its profits. When the company had sufficient capital, it would open a new store. Other than scouting locations, relatively little formal analysis has been used in its capital budgeting process. Bob has just read about capital budgeting techniques and has come to you for help. For starters, the company has never attempted to determine its cost of capital, and Bob would like you to perform the analysis. Since the company is privately owned, it is difficult to determine the cost of equity for the company. Bob wants you to use the pure play approach to estimating the cost of capital for HCL, and he has chosen Harvey Norman as a representative company Note: Most publicly traded corporations are required to submit half-yearly and annual reports to the ASX detailing the financial operations of the company over the past half-year or year, respectively. These reports are available on the ASX website at was.com.au or in the investor section of the company's own website. Go to the ASX website and search for announcements made by Harvey Norman. Find the most recent annual report or half-year report and download the report. Look on the balance sheet to find the book value of debt and the book value of equity. If you look in the report, you should find a section titled "Interest Rate Risk Management', which will provide a breakdown of Harvey Norman's long-term debt. Follow the steps below and answer the questions 1. General introduction and characteristics of this investment (10-year government bonds). To estimate the cost of equity for Harvey Norman, go to http://on.finance.boe.com plus the business section of www.cool.com.co and enter the ASX code for Haney Norman, HVN. Follow the various links to answer the following question: "What is the most recent stock price listed for Haney Norman? What is the market value of equity. or market capitalization? How many shares does Harvey Norman bare outstanding? What is the most recent annual diridend? Can you use the dividend discount model in this case? What is the beta for Haney Normant Now go back to luttp//adimasuabea.com and find the Bonds link. What is the yield on government debit Using the bistorical market risk pression, what is the cost of equity for Harvey Norman using the CAPM? 2. Yow now need to calculate the cost of delt for Haney Norman, Go to ...com.tr and find the current Business loan rates equivalent for each of Haney Norman's debuts. What is the sighted average cost of debt for Harvy Normen using the book value swights and the market value wrights? Does it make a difference in Mis otse if you use book-value weights or market value weights? 3. You now have all the necessary information to calenlate the weighted average cost of capital for Harvey Norman. Calemate the weighted average cost of capital for Harvey Norman asing book ralne wrights and market value wrights. Asume Haney Norman has a 30% tax rate. Which cost of capital number is more relevant 4. You used Harvey Norman as a pure play company to estimate the cost of capital for HCL. Are there any potential prolems with this approach in this situation