Question;This financial planning project is split into several parts;Each;section has its own tab.;Section;Problem;Introduction TAB;This;tab;Gustafson;Financial Information TAB;You;will find all the given data here;1 Cost of;Capital: Capital Structure TAB;This;section is split into two tabs: Cost of Capital A and Cost of Capital B;Cost;of Capital A concentrates on the developing Gustafson Capital Structure;Problem;a) Calculate the firm's capital;structure based on book and market values and compare with the target capital;structure.;2 Cost of;Capital: WACC TAB;Cost;of Capital B concentrates on calculating Gustafson's WACC;b) Calculate the cost of debt based on;the market return on the company's existing bonds.;c) Calculate the cost of preferred;stock based on the market return on the company's existing preferred stock;d) Calculate the cost of retained;earnings using three approaches, CAPM, dividend growth, and risk premium.;Reconcile;the results into a single estimate;e) Estimate the cost of equity raised;through the sale of new stock using the dividend growth approach;f) Calculate the WACC using equity;from retained earnings based on your component cost estimates and the target;capital structure;3 Capital;Rationing: Finding the Breakpoints TAB;This;section calculate the breakpoints;g) Where is the first breakpoint in the;MCC (the point where retained earnings runs out)? Calculate to the nearest;$.1M.;h) Calculate the WACC after the first;breakpoint.;i) Where is the second breakpoint in;the MCC (the point at which the cost of debt increases.);j) Calculate the WACC after the second;break. Calculate to the nearest $0.1M.;4 MCC -;IOS Plot TAB;In;this section we plot the Marginal Cost of Capital and the Investment;Opportunity Schedule;This;tab MCC-IOS is to be used as a template for your graphs;Use;the Commands Insert>line and;Insert>rectangle to create your plot;k) Plot Gustafson's Marginal Cost of;Capital.;l) Plot Gustafson's IOS on the same;axes as the MCC.;5 Capital;Planning TAB;In;this section, we analyze our data and make our conclusions;m) Which projects should be accepted and;which should be rejected?;n) Do any of those rejected have IRRs;above the initial WACC? Which ones?;o) If so, explain in words why they're;being rejected.;p) What is the WACC for the planning;period?
Paper#50679 | Written in 18-Jul-2015Price : $22