FCF 9th edition Chapter 14

# FCF 9th edition Chapter 14 - Chapter 14 Problems 1-26 Input...

This preview shows pages 1–12. Sign up to view the full content.

Chapter 14 Problems 1-26 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 the Office button then "Excel Options," "Add-Ins" and select "Go." Check "Analyis ToolPak" and "Solver Add-In," then click "OK."

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Chapter 14 Question 1 Input Area: Dividend per share \$2.40 Growth rate 5.50% Stock price \$52 Output Area: Cost of equity 10.37%
Chapter 14 Question 2 Input Area: Beta 1.05 Risk-free rate 5.3% Market return 12% Output Area: Cost of equity 12.34%

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Chapter 14 Question 3 Input Area: Beta 0.85 Market risk premium 8.0% T-bill rate 5.0% Dividend per share \$1.60 Growth rate 6% Stock price \$37 Output Area: 11.80% 10.58% 11.19% R E : CAPM R E : DCF R E
Chapter 14 Question 4 Input Area: Current dividend \$1.43 Dividends: Year 1 \$1.05 Year 2 \$1.12 Year 3 \$1.19 Year 4 \$1.30 Stock price \$45.00 Output Area: Arithmetic average: 6.67% 6.25% 9.24% 10.00% g 8.04% 11.47% Geometric average: Geometric growth 8.03% 11.46% g 1 g 2 g 3 g 4 R E R E

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Chapter 14 Question 5 Input Area: Dividend per share \$6.00 Stock price \$96.00 Output Area: 6.25% R P
Chapter 14 Question 6 Input Area: Settlement 01/01/08 Maturity 01/01/23 Price (% of par) 107 Coupon rate 7% Payments per year 2 Tax rate 35% Output Area: Pretax cost 6.27% Aftertax cost of debt 4.08%

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Chapter 14 Question 7 Input Area: Settlement 01/01/08 Maturity 01/01/31 Coupon rate 8% Price (% of par) 95 Payments per year 2 Tax rate 35% Output Area: a. Pretax cost of debt 8.50% b. Aftertax cost of debt 5.52% c. The after-tax rate is more relevant because that is the actual cost to the company.
Chapter 14 Question 8 Input Area: Book value of debt issue (1) \$80,000,000 Second issue Settlement date 01/01/08 Maturity date 01/01/15 Annual coupon rate 0% Coupons per year 2 Bond price (% of par) 61 Tax rate 35% Book value debt issue (2) \$35,000,000 Output Area: Book value of debt \$115,000,000 Market value of first bond \$76,000,000 Market value of second bond \$21,350,000 Market value of debt \$97,350,000 Pretax cost of second issue 7.188% Aftertax cost of second issue 4.672% Aftertax cost of debt 5.34%

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Chapter 14 Question 9 Input Area: Common stock 60% Preferred stock 5% Debt 35% Cost of equity 14% Cost of preferred stock 6% Cost of debt 8% Tax rate 35% Output Area: a. WACC 10.52% b. Since interest is tax deductible and dividends dividends are not, we must look at the aftertax cost of debt, 5.20% Hence, on an aftertax basis, debt is cheaper than the preferred stock.
Chapter 14 Question 10 Input Area: Debt-to-equity ratio 0.65 Cost of equity 15% Cost of debt 9% Tax rate 35% Output Area: WACC 11.40%

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 02/09/2012 for the course BMGT 340 taught by Professor None during the Spring '11 term at Shoreline.

### Page1 / 27

FCF 9th edition Chapter 14 - Chapter 14 Problems 1-26 Input...

This preview shows document pages 1 - 12. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online