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