Mba 520 module eight cost of capital worksheet

MBA 520 Module Eight Cost of Capital Worksheet


The assignment in this module builds on the idea of forecasting and valuation theory from Chapters 6 and 7 in Module Six by valuing a company through calculations using real data. This will strengthen your recommendation in the final project by giving you the means to provide evidence from a financial analysis. This assignment is worth a total of 100 points. See the points distribution listed with each question.



Review the questions below and use the data provided in the question to solve the calculation. As you work through each equation, think about where the data for your company may be found to make the same calculations and how the information from these calculation can inform your recommendations for your final project. Use the non-graded discussion board in this module to ask questions of your peers to inform your responses to the questions below. This assignment must be submitted as an Excel file.



1. (12.5 Points) What is the market interest rate on XYZ’s debt and its component cost of debt?

Coupon rate


Coupons per year


Years to maturity




Face value


Tax rate



Market Interest Rate =

Cost of Debt =


2. (12.5 Points) What is the firm’s cost of preferred stock?

Nominal dividend rate


Dividends per year


Par value





Cost of Preferred Stock =


3. (12.5 Points) What is XYZ’s estimated cost of common equity using the CAPM approach?


Estimated Cost of Common Equity =








4. (12.5 Points) What is the estimated cost of common equity using the DCF approach?



Current dividend


Constant growth rate



Estimated Cost of Common Equity =


5. (12.5 Points) What is the bond-yield-plus-risk-premium estimate for XYZ’s cost of common equity?

“Bond yield + RP” premium


market interest rate on XYZ’s debt



Bond-yield-plus-risk-premium estimate =


6. (12.5 Points) What is your final estimate for rs?







rd + RP



Estimate =


7. (12.5 points) XYZ estimates that if it issues new common stock, the flotation cost will be 15%. XYZ incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, considering the flotation cost?

% Flotation cost



Net proceeds after flotation



Cost of Newly Issued Common Stock


8. (12.5 Points) What is XYZ’s overall, or weighted average, cost of capital (WACC)?  Ignore flotation costs.



rd (1 – T)












Place your order
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Enjoy 10% OFF today with the coupon code: save10