Question: please answer this using excel and show your work on how you solve this please PROBLEM 1: a The Michigan Corporation Company has common stock
PROBLEM 1: a The Michigan Corporation Company has common stock outstanding that has a current price of $19.88 per share and a $1.50 current dividend (DO) per share. Michigan Corporation's dividends are expected to grow at a constant rate of 6% per year, forever. The expected risk-free rate of interest is 2.5%, whereas the expected market rate of return is 12.5%. The beta on Michigan Corporation's stock is 1.15. a. What is the cost of equity for Michigan Corporation using the dividend valuation model? b. What is the cost of equity for Michigan Corporation using the capital asset pricing model 2(CAPM) C. Number of shares of common stock outstanding: #800,000 d. The firm's outstanding bonds have ten years to maturity, total face value of debt is $15 million, face value per bond of $1,000, current price is $985 with a coupon rate of 10%. Interest is paid annually. What is the yield to maturity (YTM) on the bond? e. the tax rate is 24% Using data given above; calculate the WACC for the firm. [Hint: Use market value proportions to calculate WACC)
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