Capital Structure and Weighted Average Cost of Capital
Added on 2020-09-15
5 Pages1690 Words211 Views
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Final Assignment MICRO-CASES-E25,507Q49Requirement-A: In order to figure out how much fund left for next year for KB, following should be considered: Project X: ($32,555/$26,780) -1 = 21.56% IRR Project Y: ($30,873/$20,402) -1 = 51.32% IRRProject Z: ($57,135/$53,048) -1 = 7.70% IRRSince the average expected rate of return from the market is 20%, Project X and Project Y are the acceptable projects KB only owns 47%, and he wants to consume 49% thus loan is required. 49% of $78,450 = $38,440.5047% of $78,450 = $36,871.50 $1,569 of loan Therefore: $80,019 – $32,555 – $30,873 – $1,569 = $15022 Requirement-B $25,507 FV, 3N, 7.77 I/Y, PV = $20,417.96($8,880/0.077) FV, 5N, 7.7 I/Y, PV = $79,587.29 Present Value of KD’s Investment = $100,004.29Requirement-C -$33,459 PV, 6.2/12 = 0.5166 I/Y, 26 x 12 = 312, FV = $167,029.55 MICRO-CASES-KG1,142.20 Requirement-A $11,000,000/5,000,000 = $2.20 x 0.13 = 0.290.29 + 2.20 = 2.49 x 5,000,000 = $12,450,000Requirement-B N = 22-4 = 18 x 4 = 72 FV = $4,000$4,000 x 0.11 = 440/4 = 110 PMT15/4 = 3.75 PV = $3,008.65Requirement-CFV = $1,000
Expected ReturnSMLTSR ER(m)-ZXN +Rf 4.8%RF -1.5 0 1 2 3 Beta Final Assignment PV = $1,142.20$48.5 = PMT20N Yield To Maturity = 7.641% Requirement-DP2 = D3 / (r-g) = $107.20Thereafter use of calculator and Current Price is $90.47 per shareRequirement-E Dividend Yield: 0.49/4.90 = 10% Capital Gain Yield: 4.90 – 6.00 = -$1.10 / 6 = -18.33% MINI-CASE-Q32.8T4.8Requirement-A draw an SML graph Requirement-BNo this prices have not been properly priced as in the real market beta mark of 3.0 and -1.5 are very unlikely and investors are vary of the fact that it is either too risky or has a really low income. In the real market will the beta to be somewhere around .5 to 1.5 or even 2 as not many investors are looking for high risk investments or even low return investment, Investors are most likely to for investments that
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