Please answer the following questions in Excel. Please show your work for the questions that require formulas.1. What is the cheapest form of financing and why? 2. In economics, we hear that \”No one gets a free lunch\”. How does this relate to flotation costs? 3. Using the CAPM and the internet, Estimate the required rate of return on a company of your choice. Use the 10 year Treasury bond rate (yield) for the risk free rate and the Russell 2000 for the market rate. You can find this numbers on finance.yahoo.com, morningstar or other financial websites. Reference which website you used. Remember that the formula is r = rf + B (return on the market – rf) Russell 2000 market info can be found at http://news.morningstar.com/index/indexReturn.html Use the 3 year rate on the Russell 2000 TR. The yield for the 10 year US Treasury bond can be found at http://finance.yahoo.com/market-overview/ Using the same website, put the stock symbol or try to find the company by spelling it out under quote and find the beta on the right side (a little way down the page). You don\’t have to quote the beta like in the risk and return chapter, just use the beta from the website. Now you can compute your required rate of return. Discuss your findings. 4. There are four factors that the firm cannot control. Pick one and relate it to what you learned with your calculations in question #3.
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