There are $100$ marks available for this assignment. This assignment is worth $10\%$ of your course grade. For Assignment $4,$ you will demonstrate your comprehension of the concepts covered in Modules $6$ and $7.$ In your last assignment, you were able to estimate the cost of capital for a company. This is essential for many financial roles including capital budgeting$$deciding which projects a company should take on$$and valuation. You might want to value a company for a private transaction, for your investment portfolio, or for fair value calculations. Make sure to clearly explain your work so that your Open Learning Faculty Member can give feedback. You may get partial marks, even if your final answer is incorrect. You will submit a single Word document for this assignment, please review the Submission Guidelines. Instructions Complete the following in the order listed, and label your work. Rayburn Corporation has preferred stock that will pay an annual dividend of $$3\mathrm{.}76$ every year in perpetuity. If the required return is $3\mathrm{.}89\%,$ what is the current stock price? $(5$ marks$)$ Roscoe Raspberry Corp. just paid an annual dividend of $$2\mathrm{.}53$ on its common stock. They increase the dividend by $3\mathrm{.}30\%$ annually. What is the company's cost of equity if the current stock price is $$39\mathrm{.}16$ per share? $(5$ marks$)$ Wise Corporation stock has a beta of $1\mathrm{.}21.$ The market risk premium is $7\mathrm{.}20\%$ and the risk$-$free rate is $2\mathrm{.}94\%$ annually. What is the company's cost of equity? $(5$ marks$)$ What are the advantages of using the security market line $($SML$)$ approach to finding the cost of equity capital? What are the disadvantages? What are the specific pieces of information needed to use this method? Are all of these variables observable, or do they need to be estimated? What are some of the ways you could get these estimates? $(5$ marks$)$ Smart Corporation has a bond outstanding with a coupon rate of $6\mathrm{.}1\%$ and semi$-$annual payments. The bond has a $$2,000$ face value, a current price of $$1,933$ and matures in $19$ years. The tax rate is $21\%.$ What is the company's after$-$tax cost of debt? $(10$ marks$)$ Sage Corp. has a cost of equity of $10\mathrm{.}7\%.$ The YTM on the company's bonds is $5\mathrm{.}3\%,$ and the tax rate is $21\%.$ The company's bonds sell for $92\mathrm{.}7\%$ of par. The debt has a book value of $$381,000,$ and total assets have a book value of $$943,000.$ If the market$-$to$-$book ratio is $2\mathrm{.}47$ times, what is the company's WACC? $(10$ marks$)$ Prudent Corp. has $16,100$ shares of common stock outstanding at a price per share of $$81$ and a rate of return of $11\mathrm{.}85\%.$ The company also has $340$ bonds outstanding, with a par value of $$2,000$ per bond. The pre$-$tax cost of debt is $6\mathrm{.}25\%,$ the bonds sell for $99\%$ of par, and the tax rate is $21\%.$ What is the company's WACC? $(10$ marks$)$ Guru Corp. will pay the following dividends over the next $4$ years: $$12,$ $$8,$ $$7,$ and $$2\mathrm{.}50.$ After this time, the company will maintain a $5\%$ growth rate in dividends. What is the current share price if the required return is $12\%?(15$ marks$)$ Shrewd Corp. just paid a $$1\mathrm{.}25$ per share dividend. Dividends will grow at a rate of $28\%$ for the next $8$ years and then grow at a rate of $6\%$ in perpetuity. What is the current share price if the required return is $13\%?(15$ marks$)$ Sharp Corp. has $10,000$ bonds outstanding. These bonds are $6\mathrm{.}4\%$ coupon rate, $$1,000$ face value, and $25$ years to maturity with semi$-$annual payments. They currently sell at $108,$ which means each $$1,000$ face value bond sells for $$1,080.$ The company has $495,000$ common shares selling at $$63.$ They also have $35,000$ of $$3\mathrm{.}50$ preferred shares selling for $$72$ per share. The risk premium is $7\%,$ and the risk$-$free rate is $3\mathrm{.}2\%.$ Beta is $1\mathrm{.}15,$ and the tax rate is $35\%.$ What is the company$$s WACC? $(20$ marks$)$