Unit 4 Assignment.xlsx

Unit 4 Assignment.xlsx - Unit 4 Building Blocks for Unit 6...

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Unit 4: Building Blocks for Unit 6 Comprehensive Cost of Capital Project Book Value of Preferred Stock Preferred Stock Issued Preferred Stock Face Value $ 1,000,000 = 10,000 X Market Value of Preferred Stock Preferred Stock Issued (Dividend Market $ 1,500,000 = 10,000 X / 10 Book Value of Equity (Common Stock issued Issue Price) Retained $ 25,500,000 = 1,000,000 X + Market Value of Equity (Common Stock issued Market Price) $ 30,000,000 = 1,000,000 X CAPM: Cost of Retained Earnings Risk Free Rate + (Market Return - Risk Free Rate ) X beta 9.80% = 3.5% + 12.5% - 3.5% X 0.7 Dividend Growth: Cost of Retained Earnings (Lastest Dividend X ( 1 + Growth Rate) / Stock Price) + Growth Ra 9.72% = $ 1.65 X 4% / $ 30.00 + 4% Risk Premium: Cost of Retained Earnings Bond Yield Risk Premium (Assume 2%) 10.00% = 8% + 2% Reconciliation (Average Cost of Common Equity) 9.84%
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  • Fall '19
  • NoProfessor
  • Finance, building blocks

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