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I have attached the assignment that needs to be completed. Everything in yellow has to be filled out.

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I have attached the assignment that needs to be completed. Everything in yellow has to be filled out.
Answered Same Day Jun 25, 2021

Solution

Shakeel answered on Jun 25 2021
156 Votes
Assignment 2
    Assignment 2. Determine the WACC for Ford Motor Company (Ticker symbol: F). Please complete all required sections.
    1. We will compute the cost of equity for Ford Motor Company using two different approaches - the DCF model and the CAPM. (30 points)
    Part a. What is Ford's cost of equity if the T-bill rate is 2.5% and the market return is 16%? Please estimate beta value for the firm with 5-year monthly data (1/1/2014-12/31/2018) using data from yahoo finance website. (20 points) Conduct regression analysis and paste your Summary Output in the box to your right. Keep four decimal points.
                T-bill    Market return    beta                Paste your regression results here.
        15.0550%        2.50%    16%    0.93
                                        SUMMARY OUTPUT
                                        Regression Statistics
    Part b. Ford Motor paid an annual dividend of $0.60 in 2018. It is expected that the company will continue to pay dividend and dividend will grow at 7%. Given the market price of $8.70, what is the required rate of return for Ford's equity?                                     Multiple R    0.4881
                                        R Square    0.2383
        14.3793%        D1    P0    g                Adjusted R Square    0.2249
                0.642    8.7    7%                Standard E
or    0.0526
                                        Observations    59
    2. You can find information on two bond issues in worksheet "Bond Data". There are two bonds, one is a 4% coupon bond issued by General Motors, and the other is a 4.346% coupon bond issued by Ford. Please use this information to complete the following tasks. (40 points)                                    ANOVA
                                            df    SS    MS    F    Significance F
    Part a. Please compute the YTM for both bonds.                Ford    General                Regression    1    0.0493    0.0493    17.8292    0.0001
                Settlement    3/19/19    3/19/19                Residual    57    0.1578    0.0028
                Maturity    9/19/26    3/19/25                Total    58    0.2071
        YTM        Rate    4.35%    4.00%
    GM    4.361%        Price    $91.36    $98.13                    Coefficients    Standard E
or    t Stat    P-value    Lower 95%    Upper 95%    Lower 95.0%    Upper 95.0%
    Ford    5.794%        Redemption    $100    $100.00                Intercept    -0.0111    0.0070    -1.5935    0.1166    -0.0251    0.0029    -0.0251    0.0029
                Frequency    1    1                X Variable 1    0.9307    0.2204    4.2225    0.0001    0.4893    1.3721    0.4893    1.3721
                Basis    0    0
    Part b. What is the after-tax cost of debt for Ford given its effective tax rate for 2018 was 15%? (10...
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