# (solution) Instructions NAME: To complete the homework assignments in the

I’m a little lost with this assignment. Can anyone complete it?

Instructions
NAME:
To complete the homework assignments in the templates provided:
1. The question is provided for each problem. You may need to refer to your textbook for additional
information in a few cases.
2. You will enter the required information into the shaded cells.
3. The cells are coded:
a) T requires a text answer. Essay questions require references; use the textbook. b) C requires a calculation, using Excel formulas or functions. You cannot perform the operation on a
calculator and then type the answer in the cell. You will enter the calculation in the cell, and only the
final answer will show in the cell. I will be able to review your calculation and correct, if necessary.
c) F requires a number only. In some problems, a ?Step 1? is added to help you solve the problem.
d) Formula requires a written formula, not the numbers. For example, the rate of return = [(1 +
nominal)/ (1+inflation)]-1, or D (debt) + E (equity) = V (value).
4. Name your assignment file as &quot;lastnamefirstinitial-FINC600-Week#&quot;, and submit by midnight ET, Day
7. Problem 9-2
A company is 40% financed by risk-free debt. The interest rate is 10%, the expected market risk
premium is 8%, and the beta of the company?s common stock is .5.
Risk Free Debt
40% Interest Rate
8% Beta
0.5 a. What is the company cost of capital?
b. What is the after-tax WACC, assuming that the company pays tax at a 35% rate?
Step 1:
r(d)=
r(e)=
D/V
E/V F
C
C
C TIP: D + E = V Step 2:
a.
Cost of Capital
b. T Formula (in words) Calculation
C WACC T C Taxes
35% Problem 9-16 What types of firms need to estimate industry asset betas? How would such a firm make the estimate? Describe
the process step by step. Answer:
What types of firms need to estimate industry asset betas?
T How would such a firm make the estimate? Describe the process step by step.
T Problem 10-2 Explain how each of the following actions or problems can distort or disrupt the capital budgeting process. 