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Chapter_12

# Chapter_12 - Chapter 12 Problems 1-17 Input boxes in tan...

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Chapter 12 Problems 1-17 Input boxes in tan Output boxes in yellow Given data in blue Calculations in red 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."

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Chapter 12 Question 1 Input Area: Beta 1.30 Risk-free rate 4.5% Market return 12% Output Area: Cost of equity 14.25%

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Chapter 12 Question 2 Input Area: Settlement 01/01/05 Maturity 01/01/17 Price (% of par) 105 Coupon rate 8% Payments per year 2 Tax rate 35% Output Area: Pretax cost 7.37% Aftertax cost of debt 4.79%
Chapter 12 Question 3 Input Area: Settlement 01/01/05 Maturity 01/01/28 Price (% of par) 108 Coupon rate 10% Payments per year 2 Tax rate 35% Output Area: a. Pretax cost of debt 9.16% b. Aftertax cost of debt 5.95% c. The after-tax rate is more relevant because that is the actual cost to the company.

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Chapter 12 Question 4 Input Area: Book value of debt issue (1) \$20,000,000 Second issue Settlement date 01/01/05 Maturity date 01/01/12 Annual coupon rate 0% Coupons per year 1 Bond price (% of par) 58 Tax rate 35% Book value debt issue (2) \$80,000,000 Output Area: Book value of debt \$100,000,000 Market value of debt \$68,000,000 Pretax cost of second issue 8.093% Aftertax cost of second issue 5.260% Aftertax cost of debt 5.48%
Chapter 12 Question 5 Input Area: Common stock 55% Debt 45% Cost of equity 16% Cost of debt 9% Tax rate 35% Output Area: WACC 11.43%

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Chapter 12 Question 6 Input Area: Debt-to-equity ratio 0.60 Cost of equity 18% Cost of debt 10% Tax rate 35% Output Area: WACC 13.69%
Chapter 12 Question 7 Input Area: WACC 11.50% Cost of equity 16% Cost of debt 8.5% Tax rate 35% Output Area: D/E 0.7531

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Chapter 12 Question 8 Input Area: Shares outstanding 9,500,000 Market price per share \$53 Book value per share \$5 Bond I
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Chapter_12 - Chapter 12 Problems 1-17 Input boxes in tan...

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