Need in 7 hours

Mini Case

Estimate the cost of capital for Eastman Chemical Company (Ticker: EMN)

1. Cost of Equity

a. CAPM Model

i. Use 3.35% as the risk-free rate

ii. Use 7% as the market risk premium

iii. Collect the past five year monthly prices for EMN and S&P 500 index

iv. Calculate monthly returns

v. Use regression analysis to calculate Beta, and calculate the cost of equity

vi. Use Yahoo Finance Beta to calculate the cost of equity

b. DCF Model

i. Use Yahoo Finance to collect data

ii. Calculate the cost of equity

Compare the cost of equity using CAPM to the cost of equity using DCF. Do you observe any significant difference? What are the factors that may cause the differences?

2. Cost of Debt

i. Use www.finra.org to collect outstanding bonds information. Calculate the market value for each bond. Calculate the YTM for each bond and compare it to the reported YTM. Did you observe any significant differences between calculated and reported YTM? What factor(s) could cause such difference(s)?

ii. Calculate the cost of debt for EMN

3. Weighted Average of Capital

i. Calculate the weighted average cost of capital (assume the tax rate is 30%).