Answer To: I just need the attached spreadsheet filled out for my homework assignment.
Tanmoy answered on Jan 31 2021
Week 4 Final Assignment
Week 4 Final Assignment
Chapter 12 Chapter 13
Problems 14 & 17 Case Study
Input boxes in tan
Output boxes in yellow
Given data in blue
Answers in green
NOTE: Some functions used in these spreadsheets may require that
the "Analysis ToolPak" or "Solver Add-in" be installed in Excel.
To install these, click on "Tools|Add-Ins" and select "Analysis ToolPak"
and "Solver Add-In."
12-14
Problem 12-14 Finding the WACC
Given the following information for Lightning Power Co., find the WACC. Assume the company’s tax rate is 21 percent.
Debt: 10,000 6.4 percent coupon bonds outstanding, $1,000 par value, 25 years to maturity, selling for 108 percent of par; the bonds make semiannual payments.
Common Stock: 495,000 shares outstanding, selling for $63 per share; beta is 1.15.
Preferred Stock: 35,000 shares of 3.5 percent preferred stock outstanding, currently selling for $72 per share.
Market: 7 percent market risk premium and 3.2 percent risk-free rate.
Input Area:
Tax rate 21%
Debt
Bonds outstanding 10,000
Settlement date 01/01/00
Maturity date 01/01/25
Annual coupon rate 6.40%
Coupons per year 2
Bond price (% of par) 108 <--Here this is not listed as a rate, but reporting 10% of the bond price
Redemption value (% of par) 100 <--Here this is not listed as a rate, but reporting 10% of the par value
Par value $ 1,000
Common stock
Shares outstanding 495,000
Beta 1.15 = bE
Share price $ 63
Preferred stock outstanding
Shares outstanding 35,000
Dividend percentage 3.50% <---Also referred to as 'Coupon rate'
Share price $ 72
Market
Market risk premium 7.00% = (RM - Rf) = (Expected return on market - risk-free rate)
Risk-free rate 3.20% = (Rf)
Complete the following analysis. Do not hard code values in your calculations. Leave the "Basis" input blank in the YIELD function. You must use the built-in Excel function to answer this question.
Output Area:
Market value of debt $ 10,800,000 = Bond Price (% of par)/Redemption value (% of par)*Par Value*Bonds Outstanding
Market value of equity $ 31,185,000 = Shares outstanding of common stock * Share price
Market value of preferred $ 2,520,000 = Shares outstanding of preferred stock * Share price
Market value of firm $ 44,505,000 = Total of all financing components (Total Assets = Total debt + Total equity + Total Preferred)
Market value weight of debt 0.2427 = MV of debt/MV of firm
Market value weight of equity 0.7007 = MV of equity/MV of firm
Market value weight of preferred 0.0566 = MV of prefered/MV of firm
Pretax cost of debt 5.79% <--Must be calculated using YIELD fx for credit cosideration
Aftertax cost of debt 4.57% <---Pretax cost of debt * (1-Tax rate)
Cost of equity 11.25% <---Do we use DGM or SML formula...