Reference no: EM13944520
a. In Excel: Value a company using the following information:
i. Bonds Outstanding: 8,000 bonds selling at 97 with a face value of $1,000, coupon rate of 4.5%, annual coupons, and 22 years to maturity.
ii. Common Stock Outstanding: 10 million shares outstanding, price of $94, risk-free rate of .005, expected market return of .125, and beta of 1.4.
iii. Preferred Stock Outstanding: 1 million shares outstanding, price of $10, and dividend of $0.40
iv. Tax rate: 39%
v. Projections:
1. Sales of $320 million expected to grow at 7% per year over the next 10 years.
2. COGS of $75 million expected to grow at 4% per year over the next 10 years.
3. Depreciation expense expected to stay constant at $25 million over the next 10 years.
4. Net capital spending of $70 million next year, with no other net capital spending expected after the first year.
5. Change in net working capital of 5% of sales per year.
6. All above listed items are expected to settle to a constant growth of 3% per year after the 10th year, except depreciation which will become $0 after year 10.
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