Question: Show EXCEL Work, please! Use the capital asset pricing model we used in class to determine the value of a firm with the following characteristics:

Show EXCEL Work, please!

Use the capital asset pricing model we used in class to determine the value of a firm with the following characteristics:

risk free rate 2.00%

risk premium 4.00%

Beta 1.5

Investors willing to accept a dividend rate of 25% in the growth years. When the companys growth slows, they will have to increase their dividend rate to 50%.

Return on Capital (before taxes) in fast growth years is 30%. The company expects the return on its capital (before taxes) to fall to 14% after the fast growth period.

It costs the company 7% for any money that it borrows.

Tax Rate 35%

The companys equity to capital ratio is 72%.

Length of growth Period 6 years

Current initial operating Income (EBIT) $100

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