SOLUTION: FIN 405 UM Cost of Equity Capital Market Risk & Risk Free Rates Excel Worksheet

Attached. Please let me know if you have any questions or need revisions.Prof. BarrettFin 405Cost of CapitalOn the next page you are given data and financial statementsfor1. afirm.Use that data to do the following:Costof EquityBetaRfMkrtRisPremkCAPM =a. Compute their cost of equity capital using the CAPM and assuming amarket risk premium of 8.00% and a Risk-free rate of 1.20%.b. Compute their cost of equity capital using the 2-stage DividendDiscount Model . Use their current price, most recent annualdividend and projected 5 (n ) year earnings growth rate. Use 3% asthe long term growth rate. (Hint, you will need to guess at kDDM andthen use Goal Seek to find the correct kDDM.tn=D0 =1.20%8.00%DivPVP5P0 =gs =g=3.00%c. Build your table with IF statements so if I change the number ofkDDM = 10.000%periods for the change form short- to long-term in the tablerecomputes correctly. Your value for n should be able to take on anyvalue from 2 to 16.2. Data TableDo at least 3 Data Tables (You MUST use the Data Table Featureunder Data/What If Analysis). Try sensitivity of kCAPM tochanges in beta, DDM Price as a function of growth rates, Other?Use your imagination. What can you come up with?3. Graph Data table.Graph each of your Data Tables. On one or two, practice formattingto make the graph look really good. Try inserting a picture orsomething.Goal Seek:Enter Exactly what youwould type into the GoalSeek toolSet CellTo ValueBy Changing20210211062836a4_costofcapital_cnum__1__12/11/2021Prof. BarrettFin 405SpreadsheetPV(Calc)VBA FunctionPV(Calc)20210211062836a4_costofcapital_cnum__1__12/11/2021DateFeb-16Mar-16Apr-16May-16Jun-16Jul-16Aug-16Sep-16Oct-16Nov-16Dec-16Jan-17Feb-17Mar-17Apr-17May-17Jun-17Jul-17Aug-17Sep-17Oct-17Nov-17Dec-17Jan-18Feb-18Mar-18Apr-18May-18Jun-18Jul-18Aug-18Sep-18Oct-18Nov-18Dec-18Jan-19Feb-19Mar-19Apr-19May-19RS&P3.85%-3.81%3.84%4.89%-2.05%5.20%-3.08%-0.89%-2.26%6.24%3.80%8.40%-3.97%3.28%5.12%-5.96%-3.85%5.18%-1.75%7.64%-5.16%-2.49%-10.37%1.95%4.16%-9.96%-7.02%8.45%1.03%-1.72%-1.79%-5.95%-9.16%2.81%7.88%1.80%-1.60%-2.21%4.46%-4.97%RT-bill0.38%0.35%0.37%0.40%0.33%0.37%0.39%0.36%0.40%0.36%0.38%0.41%0.42%0.41%0.44%0.48%0.46%0.50%0.43%0.48%0.53%0.49%0.50%0.58%0.59%0.48%0.49%0.46%0.37%0.33%0.29%0.32%0.40%0.30%0.23%0.19%0.15%0.13%0.14%0.16%Ri28.41%0.90%-29.19%2.61%-8.31%49.62%2.53%-4.11%24.66%4.53%42.58%65.25%-10.85%48.64%5.13%2.40%-10.09%16.96%-10.56%20.95%-13.40%-16.19%-19.70%9.67%0.22%-34.76%-21.16%7.88%-5.32%24.18%-4.84%-32.47%3.03%7.79%3.47%-1.57%24.98%-3.71%-22.98%-21.56%Annual Income Statement(Values in Millions)SalesCost of SalesGross Operating ProfitSelling, General & Admin. ExpenseOther TaxesEBITDADepreciation & AmortizationEBITOther Income, NetTotal Income Avail for Interest Exp.Interest ExpenseMinority InterestPre-tax IncomeIncome TaxesSpecial Income/ChargesNet Income from Cont. OperationsNet Income from Discont. Opers.Net Income from Total OperationsNormalized IncomeExtraordinary IncomeIncome from Cum. Eff. of Acct. Chg.Income from Tax Loss CarryforwardOther Gains (Losses)Total Net IncomeDividends Paid per SharePreferred DividendsBasic EPS from Cont. OperationsBasic EPS from Discont. OperationsBasic EPS from Total OperationsDiluted EPS from Cont. OperationsDiluted EPS from Discont. OperationsDiluted EPS from Total OperationsJun-19Jul-19Aug-19Sep-19Oct-19Nov-19Dec-19Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Oct-20Nov-20Dec-20Jan-21-1.07%-7.06%-8.10%0.77%-10.00%7.46%6.08%-5.34%-2.31%-1.52%1.04%8.25%6.31%1.64%2.29%2.55%-0.94%6.02%1.64%4.54%0.14%0.15%0.15%0.15%0.14%0.15%0.19%0.11%0.10%0.10%0.11%0.10%0.11%0.12%0.08%0.07%0.08%0.08%0.08%0.08%-21.12%19.57%5.69%-4.19%-18.0…

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