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assignment_4_step_5_update.xlsx

Sheet1

Q13	Option 1
	Debt Holders
	Copoun Amount yearly	2	Million USD		we assume FV of 100	100
	Redemable value	30	Million USD		yield	4%
	Yield	4.00%			today's dat	1/1/16
	Time in years	20			maturity date	1/1/36
					Coupon rate	6.67%
	Amount raised today	40.87	Million USD		Price	136.2408702532
	Equity
	Dividend at year 5	3	Million USD
	Growth	0.04
	Cost of equity	7.50%
	Price at end of year 4	64.1742857143
	Value Of Equity	85.7142857143
	Amount raised today	105.05	Million USD
	Source	Cost	Values	Weights	Weighted Cost
	Debt	4.00%	40.87	0.28	1.12%
	Equity	7.50%	105.05	0.72	5.40%
	Total		145.92		6.52%
	WACC	6.52%
	Option 2
	Debt Holders
	Copoun Amount yearly	1	Million USD		we assume FV of 100	100
	Redemable value	12	Million USD		yield	3.50%
	Yield	3.50%			today's dat	1/1/16
	Time in years	20			maturity date	1/1/36
					Coupon rate	8.33%
	Amount raised today	20.24	Million USD		Price	168.69
	Equity
	Dividend at year 5	3.9	Million USD		Capital structure with Option 2 should be chosen as it generates higher capital.
	Growth	4.50%
	Cost of equity	7.00%
	Price at end of year 4	163.02
	Amount raised today	156.00	Million USD
	Source	Cost	Values	Weights	Weighted Cost
	Debt	3.50%	20.24	0.11	0.40%
	Equity	7.00%	156.00	0.89	6.20%
	Total		176.24		6.60%
	WACC	6.60%
	Option	Cost of Capital	Amount Raised
	Option 1	6.52%	145.92
	Option2	6.60%	176.24