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

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

Shakeel answered on Jun 25 2021
144 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 approa
ches - 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 Error    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 Error    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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