Given information for General Motors: Cost of debt General Motors (from the footnotes to the financial...

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Given information for General Motors: Cost of debt General Motors (from the footnotes to the financial statements) Beta for General Motors (from Yahoo or other financial sources) Normalized risk free rate of return in the market (observing the 10 rate on government issued s Equity risk premium (from historical studies of the market) Market value of debt (use book or amount disclosed in the footnotes if different) Number of common shares outstanding Market price of the common stock (on July 13, 2021) Market value of equity (number of shares times the stock price) Calculate the required return (weighted average cost of capital) Debt Equity Year Operating Income earned Less required income Economic profit or (loss) Market Weights Component Weighted Values Cost Cost Another way to look at this: Return on invested capital Weighted average cost of capital Spread 2016 2017 2018 $ 8,686 $ 8,661 $ 4,445 $ Required return (weighted average cost of capital). Calculate the Economic Profit (Economic Value Added) Year 2016 2017 2018 2019 2020 Net Operating Assets $ 172,464 $168,070 $180,902 $183,766 $195,329 times the required return Required income in dollars 5.04% 5.15% 2.46% 2.80% 1.39 $ 2.98% 3.98% 5.00% $ 109,379 1,460 31.81 2020 2019 5,481 $ 6,634 $ 2022 $206,491 $ 211,641 3.40% 2021 2022 2021 9,324 $10,314 4.52% 4.87% Given information for General Motors: Cost of debt General Motors (from the footnotes to the financial statements) Beta for General Motors (from Yahoo or other financial sources) Normalized risk free rate of return in the market (observing the 10 rate on government issued s Equity risk premium (from historical studies of the market) Market value of debt (use book or amount disclosed in the footnotes if different) Number of common shares outstanding Market price of the common stock (on July 13, 2021) Market value of equity (number of shares times the stock price) Calculate the required return (weighted average cost of capital) Debt Equity Year Operating Income earned Less required income Economic profit or (loss) Market Weights Component Weighted Values Cost Cost Another way to look at this: Return on invested capital Weighted average cost of capital Spread 2016 2017 2018 $ 8,686 $ 8,661 $ 4,445 $ Required return (weighted average cost of capital). Calculate the Economic Profit (Economic Value Added) Year 2016 2017 2018 2019 2020 Net Operating Assets $ 172,464 $168,070 $180,902 $183,766 $195,329 times the required return Required income in dollars 5.04% 5.15% 2.46% 2.80% 1.39 $ 2.98% 3.98% 5.00% $ 109,379 1,460 31.81 2020 2019 5,481 $ 6,634 $ 2022 $206,491 $ 211,641 3.40% 2021 2022 2021 9,324 $10,314 4.52% 4.87%

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Calculating the Required Return Weighted Average Cost of Capital 1 Calculate the weight of equity We... View the full answer