Corporate Finance Theory and Practice Assignment

Assignment Task

Perform these tasks in Microsoft Excel

1. What is the estimated CAPM β. Report the regression output in the Excel spreadsheet. Provide a screenshot of the regression output in the report.

2. Interpret the CAPM β.

Financial Information

• There are 1.454 billion shares outstanding.

• Short-term and long-term debt amounts are $38,778 millions and $75,921 millions, respectively.

• Last closing share price is $33.64.

• Depreciation & amortization expenses are $11,276 millions.

• Earnings before interest and taxes are $10,314 millions.

• Marginal tax rate is 21% and the effective tax rate is 14.75%.

• Government bond yield is 5%.

Questions

1. What is the WACC under the optimal capital structure suggested by the Excel spreadsheet analysis?

2. In your baseline scenario, the expected market risk premium (MRP) is 7% and the government bond yield is 5%. However, you believe the MRP can be as 12% or as low as 5%. You also believe that the government bond yield can range from 2% to 7%. Analyze how sensitive the WACC is to your assumptions of the MRP (in increments of 0.5%) and the government bond yield (in increments of 1%)?

3. Find the highest and lowest WACCs contained in your sensitivity analysis. To derive a WACC that better accounts for extreme scenarios, you decide to assign the following probability weights: Highest (20%); Baseline (70%); Lowest (10%). Find the probability-weighted average WACC. Clearly show your workings?

This Accounting and Finance Assignment Help has been solved by our Accounting and Finance Experts at My Uni Paper. Our Assignment Writing Experts are efficient to provide a fresh solution to this question. We are serving more than 10000+ Students in Australia, UK & US by helping them to score HD in their academics. Our Experts are well trained to follow all marking rubrics & referencing style.