Need help with popular SDSU FIN 423 Haddad case study: Please look up any missing relevant information, the following course hero link has Part A completed correctly, but has missing info for Part B: https://www.coursehero.com/file/15336659/Star-Appliance-Case-Solutiondocx/?justUnlocked=1

Please complete the following Part B: (Need Help by early tomorrow morning if possible)

1. Estimate the cost of equity for Star using the dividend discount model, the earnings/price model, and the CAPM. Do the models estimate the same things in different ways, or do they estimate different things?

Div Discount= D1/P+g

P/E Ratio= Price per share/Earnings per share

CAPM: Rj=Rf+Bj(Rm-Rf)

2. What is Star's cost of capital under its current and proposed capital structures?

3. Can the method by which stock analysts currently evaluate Star's stock be used for evaluating internal investment opportunities? If so, do any adaptations have to be made? If not, why are investments in the stock market different from internal investment opportunities?

4. Which projects should Star accept?

*(information obtained from CH, please double check for accuracy)

Fridge:

IRR = 14.5%, WACC=10.74%

Dryer:

IRR=17.2%, new WACC=8.70% (beta=0.88)

So, since IRR is greater for both projects, accept both.

5. What difference did you find between Stars cost of capital in 1976 and in 1984? To what do you attribute the difference?