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Finance:Cost of capital, Capital budgeting and Bonds.

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I need step by step calculations using EXCEL functions showing how these 7 problems would be solved. The answers to each problem is at the end of the attachment.

Please use EXCEL functions/formulas to show how each problem can be solved and a brief explanation of what the answers mean. That will help me to greatly understand.


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Solution Summary

The problem set deals with determining share value, cost of equity, internal rate of return, net present value etc with provided information.

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9 - 13
Market price 39
Growth rate 4%
Dividend 1.5
Cost of retained earnings 7.85% =(1.5 + (4% * 39))/39

9 - 16
Risk-free rate 3%
Market return 11%
Beta 1.6
Cost of equity 15.8% =3% + (1.6 * (11% - 3%))

9 - 19
Weight Flotation cost Selling price Dividend Growth rate After-tax Cost
Debt 50% 6.60% 3.3%
Preferred stock 17% 0.75 26 2 13% 7.9% 1.3%
Common equity 33% 4.00 143 7 13% 18.0% 6.0%
Total 1.00 WACC 10.632%

10 - 11
Cal Aron
Cash flows Cash flows
Year Outflow Inflow Outstanding balance Year Outflow Inflow Outstanding balance
0 -2,000 -2,000 0 -2,500 -2,500
1 900 -1,100 1 1,500 -1,000
2 1100 0 2 1,300 300
3 1300 1,300 3 800 1,100
Payback period 2 Years. Payback period 1 Year, 9 months

Cash ...

Solution provided by:
  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
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