Your assignment is to use the both the constant growth version of the dividend discount model (DDM) and the capital asset pricing model (CAPM) to estimate the required return for Great Plains Energy Incorporated (GXP). Then determine the capital structure and calculate the WACC. I encourage you to work in groups of no more than six students to complete the assignment.

Step 1: Collect necessary data.

Data Sources:

Obtain beta, dividend per share (DIV₀), payout ratio, return on equity (ROE), market value of equity (market cap), market value of debt (total debt) from: http://finance.yahoo.com/

Assume the expected return for the market is 14%, the expected return on debt is 4.5%, the yield on treasury bonds is 3.03% and the tax rate is 35%.

Step 2: Complete the Quiz Solution Sheet.

Make sure each students name appears at the top of the quiz solution sheet. Write clearly or type your inputs, calculations and answers on the quiz solution sheet.

Quiz Solution Sheet Names:___________________________________

Ticker Symbol: ___________

Calculation Inputs: (Use the numbers reported from Yahoo Finance).

Stock Price: __________

Dividend (DIV0): ________

Beta: ________

Return on Equity (ROE): ________

Payout Ratio: ________

Market Cap: _______

Total Debt: _______

Calculations:

Calculation of Growth:

Calculation of Required Return using constant-growth DDM (Remember to use DIV1):

Calculation of Required Return using CAPM:

Calculation of WACC (use CAPM required return calculated above; use total debt and market cap to find D/V and E/V):