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

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Assignment 1

QVC ASC’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 ASC’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 week’s previous assignment, add two more tabs in which you answer/solve the following (be sure to label tabs accordingly):

1.What is QVC AMC’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

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