eatimate the most current weighted cost of capital for Harley Davidson. please help me complete this problem
Fantastic news! We've Found the answer you've been seeking!
Question:
eatimate the most current weighted cost of capital for Harley Davidson. please help me complete this problem in excel and please show formulas. thank you!!
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/6648999537738_94066489994bea15.jpg)
![image text in transcribed](https://s3.amazonaws.com/si.experts.images/answers/2024/05/66489995c5759_941664899956bab2.jpg)
Transcribed Image Text:
Problem 2: Estimate the most current Weighted Average Cost of Capital of Harley Davidson Inc (ticker: HOG; CUSIP: 412822). Use CAPM to estimate the cost of equity. Assume that the capital structure (the market debt-to-equity ratio) observed as of the most recent annual financial statements remains in place forever for the company. Also assume that the market risk premium is 5% and that the marginal tax rate is 21%. Recipe: a) Calculate the cost of debt using most recent yields from a representative set of Harley Davidson public bonds. b) Calculate the market value of Harley Davidson debt using book value of debt adjusted by the price to face value multiple of a set of public bonds of Harley Davidson. c) The marginal tax rate is provided. d) Calculate the market value of equity using number of shares outstanding from the most recent financial report and historical stock price as of that date from NYSE, NASDAQ or Yahoo. e) Calculate the cost of equity using CAPM. For that, you are provided the market risk premium. Use current yield on the 10-year Treasury bond as the risk-free rate, and calculate the beta of Harley Davidson stock using 5 years (that is, 60 months) of monthly stock returns and value- weighted (VW) CRSP portfolio as the market portfolio. Data on stock returns are provided in the Excel file obtained from the CRSP database (column G contains the monthly returns of Harley Davidson stock, column I contains monthly returns of the value-weighted CRSP portfolio of stocks, column K contains monthly returns of the S&P 500 portfolio of stocks). f) Combine it all to calculate Weighted Average Cost of Capital (WACC) for Harley Davidson. Suggested sources of the data: 1. SEC's Edgar database-for financial statements and annual or quarterly report (10-K or 10-Q) 2. Stock returns from CRSP database-to calculate the beta. 3. FINRA's TRACE database-for public bond yields and prices 4. US Treasury's web-site-for T-bond rates 5. Yahoo's finance web-site, NYSE.com or NASDAQ.com-for the stock price around the date of the most recent financial report. To get to Problem 2: Estimate the most current Weighted Average Cost of Capital of Harley Davidson Inc (ticker: HOG; CUSIP: 412822). Use CAPM to estimate the cost of equity. Assume that the capital structure (the market debt-to-equity ratio) observed as of the most recent annual financial statements remains in place forever for the company. Also assume that the market risk premium is 5% and that the marginal tax rate is 21%. Recipe: a) Calculate the cost of debt using most recent yields from a representative set of Harley Davidson public bonds. b) Calculate the market value of Harley Davidson debt using book value of debt adjusted by the price to face value multiple of a set of public bonds of Harley Davidson. c) The marginal tax rate is provided. d) Calculate the market value of equity using number of shares outstanding from the most recent financial report and historical stock price as of that date from NYSE, NASDAQ or Yahoo. e) Calculate the cost of equity using CAPM. For that, you are provided the market risk premium. Use current yield on the 10-year Treasury bond as the risk-free rate, and calculate the beta of Harley Davidson stock using 5 years (that is, 60 months) of monthly stock returns and value- weighted (VW) CRSP portfolio as the market portfolio. Data on stock returns are provided in the Excel file obtained from the CRSP database (column G contains the monthly returns of Harley Davidson stock, column I contains monthly returns of the value-weighted CRSP portfolio of stocks, column K contains monthly returns of the S&P 500 portfolio of stocks). f) Combine it all to calculate Weighted Average Cost of Capital (WACC) for Harley Davidson. Suggested sources of the data: 1. SEC's Edgar database-for financial statements and annual or quarterly report (10-K or 10-Q) 2. Stock returns from CRSP database-to calculate the beta. 3. FINRA's TRACE database-for public bond yields and prices 4. US Treasury's web-site-for T-bond rates 5. Yahoo's finance web-site, NYSE.com or NASDAQ.com-for the stock price around the date of the most recent financial report. To get to
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
In Australia, the banking sector is dominated by four main institutions, the ANZ Banking Group, Commonwealth Bank, National Australia Bank, and Westpac. To maintain a competitive banking market, the...
-
Hill Motor Company, one of the country's largest automobile manufacturers, disclosed the following information about its inventory in the notes to its financial statements: Inventories are stated...
-
Do more educated people spend more time watching or news on the Internet? Conduct a regression analysis to determine whether there is enough statistical evidence to conclude that the more education...
-
Where do the following accounts (and their balances) appear in the balance sheet? a. Dividends Payable-Common Stock b. Stock Dividend Distributable
-
Phillips, Inc., a cash basis C corporation, completes $100,000 in sales for year 1, but only $75,000 of this amount is collected during year 1. The remaining $25,000 from these sales is collected...
-
Can you solve by hand. I don't need the SAS code
-
Smart work Computer manufactures scanners in its two divisions: the ASSEMBLY Division and the COMPONENT Division. The COMPONENT Division produces circuit board that can be used by the ASSEMBLY...
-
If an investment earns an interest rate of 3 % per year, compounded annually, and is worth $ 1 0 0 in 1 9 8 2 , what would it be worth in 2 0 2 2 ? ( Enter an answer correct to the nearest cent. ) .
-
A restaurant wants to expands its dining capacity. The building they want to acquire cost P400,000 and estimated a renovation cost of P180,000. The building will have an estimated salvage value of...
-
4. Suppose that f(x) = (x) using constants c and , and g(x) = O(x) using constants c2 and 2. We can prove that f(x)/g(x) = (x) using constants c3 and 3. Assume that g(x) is always strictly positive....
-
Suppose that in 2020, the South Korean rate of inflation was 1.8%, and the Japanese rate of inflation was 0.2%. If the Japanese Yen depreciated relative to the South Korean Won by 2% in the same...
-
Define the roles played by each branch of the government in policy modification. Discern distinction between policy initiation and policy modification. Discuss the concept of incrementalism in public...
-
James A. and Ella R. Polk, ages 70 and 65, are retired physicians who live at 13319 Taylorcrest Street, Houston, Texas 77079. Their three adult children (Benjamin Polk, Michael Polk, and Olivia...
-
What is your opinion of advertising awards, such as the Cannes Lions, that are based solely on creativity? If you were a marketer looking for an agency, would you take these creative awards into...
-
Why do managers, banks, lending agencies, owners, and potential owners need the financial information for a business?
-
What are four common objectives for analyzing a business's financial information?
-
Which accounting concept is being applied when comparative financial statements are prepared to provide useful information for statement users?
![Mobile App Logo](https://dsd5zvtm8ll6.cloudfront.net/includes/images/mobile/finalLogo.png)
Study smarter with the SolutionInn App