# determine constant growth rate of stock and expected stock price also determine cost of capital and the best capital structure

Assignment 1

QVC ASCâ€™s current stock price is \$24, and its last dividend was \$1.89. NCU ASC has a very strong financial position so its required rate of return is 14%, and dividends are expected to grow at a constant rate in the future.

Create an Excel workbook with two tabs in which you answer/solve the following (be sure to label tabs accordingly):

1.What is the constant growth rate of QVC ASC stock?

2.Given the growth rate in #1, what is QVC ASCâ€™s expected stock price in five years?

Length: One Excel Workbook

Assignment 2

Instructions

QVC AMC received the following estimates for its costs of debt and equity financing at various capital structures:

 Table 5. Example Data % Debt After-Tax Cost of Debt Cost of Equity 0% – 14% 24% 7.1% 15% 37% 8.6% 20% 58% 9.7% 24% 78% 12.9% 29%

In the same Excel workbook from this weekâ€™s previous assignment, add two more tabs in which you answer/solve the following (be sure to label tabs accordingly):

1.What is QVC AMCâ€™s cost of capital at 58% debt?

2.What is the optimal capital structure for QVC AMC, i.e., the lowest cost of capital?

Length: One Excel Workbook

PROVIDE A BRIEF DESCRIPTION OF FORMULA’S USED FOR ALL CALCULATIONS