Math Gurus help me

Genghiskhan - Heavens Tear
Genghiskhan - Heavens Tear Posts: 321 Arc User
edited October 2012 in General Discussion
I'll admit this is homework. It's due in about 40 minutes. I doubt I will get a reply tonight...

If I get a reply before due time with the correct stuff, I will give you 30 gold on any server of your choice...

More so, I want this as a study tool for my final, because I know this **** is gonna be on my final in two weeks...

Therefore, first person to contact me with the correct stuff...15 gold on the server of your choice or 20 on Heavens Tear

Calculating the WACC Here is the condensed 2011 balance sheet for Skye Computer Company (in thousands of dollars):



15ex153.png




Skye's earnings per share last year were $3.20. The common stock sells for $55.00, last year's dividend (D0) was $2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skye's preferred stock pays a dividend of $3.30 per share, and its preferred stock sells for $30.00 per share. The firm can issue long-term debt at an interest rate (or before-tax cost) of 10%, and its marginal tax rate is 35%. The firm's currently outstanding 10% annual coupon rate long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is 6%, and Skye's beta is 1.516. In its cost of capital calculations, the company considers only long-term capital; hence, it disregards current liabilities for calculating its WACC.
a.
Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newly issued common stock. Use the DCF method to find the cost of common equity.

b.
Now calculate the cost of common equity from retained earnings using the CAPM method.

c.
What is the cost of new common stock based on the CAPM? (Hint: Find the difference between re and rs as determined by the DCF method and add that differential to the CAPM value for rs.)

d.
If Skye continues to use the same market value capital structure, what is the firm's WACC assuming that
1.
it uses only retained earnings for equity?

2.
If it expands so rapidly that it must issue new common stock?
Post edited by Genghiskhan - Heavens Tear on

Comments

  • tripletriad
    tripletriad Posts: 26 Arc User
    edited October 2012
    Genghiskhan - Heavens Tear wrote: »
    I'll admit this is homework. It's due in about 40 minutes. I doubt I will get a reply tonight...

    May the force be with you b:bye
  • Genghiskhan - Heavens Tear
    Genghiskhan - Heavens Tear Posts: 321 Arc User
    edited October 2012
    I honestly dont plan on getting it submitted for the homework. but the homework assignment represents like 1/200th of my grade, where as the final is nearly a third.
  • Asterelle - Sanctuary_1381265973
    Asterelle - Sanctuary_1381265973 Posts: 7,881 Arc User
    edited October 2012
    Economics isn't math. Next time ask about Lagrange multipliers or compactifications of Hausdorff spaces.
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  • Xx_BeLLa_xX - Harshlands
    Xx_BeLLa_xX - Harshlands Posts: 7,231 Arc User
    edited October 2012
    Kids should do their homework themself.
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  • Genghiskhan - Heavens Tear
    Genghiskhan - Heavens Tear Posts: 321 Arc User
    edited October 2012
    Finance = Math! Formulas = Math!

    Bella...I agree

    However, like I said, I don't plan on getting this turned in (deadlines in 2 minutes)

    moreso now, I want it for a study tool for the final.
  • TPstar - Sanctuary
    TPstar - Sanctuary Posts: 300 Arc User
    edited October 2012
    You spent a few minutes to type the question, then another few to make the screen shot and upload.


    If you use your time wisely, shouldn't you be calling a classmate or try to work on solving the silly question?
  • Asterelle - Sanctuary_1381265973
    Asterelle - Sanctuary_1381265973 Posts: 7,881 Arc User
    edited October 2012
    Genghiskhan - Heavens Tear wrote: »
    Finance = Math! Formulas = Math!

    That's like claiming every class that involves reading is Literature.
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  • Decus - Dreamweaver
    Decus - Dreamweaver Posts: 5,033 Arc User
    edited October 2012
    I keep clicking these threads and being disappointed.
    Proving that not only archers do math since 2009. b:victory
    Current math challenge: pwi-forum.perfectworld.com/showthread.php?t=1029711&page=45
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  • crystalpink
    crystalpink Posts: 0 Arc User
    edited October 2012
    *sighs*


    Same person with same excuses.
    Better drop that class if your interest is not into it.
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  • Salari - Raging Tide
    Salari - Raging Tide Posts: 2,102 Arc User
    edited October 2012
    Asterelle - Sanctuary wrote: »
    That's like claiming every class that involves reading is Literature.

    I think the OP is refering to the math that is part of Economics not that Economics is math
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  • Asterelle - Sanctuary_1381265973
    Asterelle - Sanctuary_1381265973 Posts: 7,881 Arc User
    edited October 2012
    Salari - Raging Tide wrote: »
    I think the OP is refering to the math that is part of Economics not that Economics is math

    Maybe he should put out a call for "math gurus" to do his Psychology homework.

    After all, Psychology is really just an aspect of Biology. The foundation of Biology is Chemistry. Chemistry is really just Physics. And Physics has lots of formulas which makes it Math.
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  • VenusArmani - Dreamweaver
    VenusArmani - Dreamweaver Posts: 6,009 Arc User
    edited October 2012
    Use a site like Yahoo Answers, they'll give you help with all of the problems for free. And you'll be much more on topic. :P Instead of posting your homework here so often. :P
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  • Xainou - Sanctuary
    Xainou - Sanctuary Posts: 5,369 Arc User
    edited October 2012
    Ew, thinking. b:shocked
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  • Jaabg - Sanctuary
    Jaabg - Sanctuary Posts: 2,256 Arc User
    edited October 2012
    Salari - Raging Tide wrote: »
    I think the OP is refering to the math that is part of Economics not that Economics is math

    That is finance, not economics. Each field at the advance lvl branches into it's own language, it is not easy to translate from one language to another. In economics we deal with maximization, minimum problems which are slightly different from the math ones. The language used, notation inside is not always the same. There is more interpretation in economics at times, not always. Just by saying something has formulae it is math, that is a sad day.
    Genghiskhan - Heavens Tear wrote: »
    If I get a reply before due time with the correct stuff, I will give you 30 gold on any server of your choice...

    Therefore, first person to contact me with the correct stuff...15 gold on the server of your choice or 20 on Heavens Tear

    Had you kept the reward the same, there would have been a higher incentive. Economics, you were willing to fore go 30 gold for 40 minutes time crunch, failing that you felt 15 was adequate with the new constraint. Take the same thought from the person solving this. They would get 30 gold if they solved within time constraint and 15 gold if not. That means they have an incentive to solve it in 40 minutes or less.

    If you keep the gold amount the same, the person is no better of or worse of if the problem is solved in 40 minutes or not, so there is equal incentive to work in both time periods. Since you were willing to give up 30, giving it up to gain understanding, would have been a profitable gain for you, in future you would't be asking for the finals.

    That is economics/psychology/common sense/life/logic (maybe?).

    I just want to hear what you get in that class after the finals b:cute. Apparently finance is not your thing.
  • Salari - Raging Tide
    Salari - Raging Tide Posts: 2,102 Arc User
    edited October 2012
    Asterelle - Sanctuary wrote: »
    Maybe he should put out a call for "math gurus" to do his Psychology homework.

    After all, Psychology is really just an aspect of Biology. The foundation of Biology is Chemistry. Chemistry is really just Physics. And Physics has lots of formulas which makes it Math.

    You are beyond reaching
    Marine - Marshall - Raging Tides - Retired
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    DEMHEALSMAN - Dreamweaver
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  • Docpetiot - Sanctuary
    Docpetiot - Sanctuary Posts: 29 Arc User
    edited October 2012
    I am a bit surprised by Decus and Asterelle replies.
    Financial math are still math, and you do find very tricky and nice math in it.
    Nevertheless, I doubt the OP got a clue of what the Ito lemma is or what is stochasticity.
    And, as a former math teacher, I definitly don't support this kind of thread.
  • Genghiskhan - Heavens Tear
    Genghiskhan - Heavens Tear Posts: 321 Arc User
    edited October 2012
    Doc...you are right, i have no clue what those are, but they have not been covered AT ALL in this class either. it is a Financial Management class that along with my payroll accounting class are teaching me nothing I will ever actually need, as all friends I have in the field already have told me "We don't need to know that garbage, programs do it all for us"
  • Mooooooooo - Lost City
    Mooooooooo - Lost City Posts: 377 Arc User
    edited October 2012
    http://xkcd.com/435/
    youtube channel: youtube.com/user/chezedude
  • augustfinknottle
    augustfinknottle Posts: 276 Arc User
    edited October 2012
    Mooooooooo - Lost City wrote: »
    http://xkcd.com/435/

    xkcd forgot that Math is just a branch of logic, though, which is part (basis?) of philosophy.
  • U_Sasuke - Sanctuary
    U_Sasuke - Sanctuary Posts: 643 Arc User
    edited October 2012
    funny how i never see any archers around when people need help with math-related questions for homework on forums....LOL ARCHERS!
  • Decus - Dreamweaver
    Decus - Dreamweaver Posts: 5,033 Arc User
    edited October 2012
    U_Sasuke - Sanctuary wrote: »
    funny how i never see any archers around when people need help with math-related questions for homework on forums....LOL ARCHERS!

    It's so weird. I swear there was a thread somewhere where people used to ask for homework help...

    Darn, I wish I could find it! b:cry
    Proving that not only archers do math since 2009. b:victory
    Current math challenge: pwi-forum.perfectworld.com/showthread.php?t=1029711&page=45
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  • truekossy
    truekossy Posts: 7,021 Arc User
    edited October 2012
    Decus - Dreamweaver wrote: »
    It's so weird. I swear there was a thread somewhere where people used to ask for homework help...

    Darn, I wish I could find it! b:cry

    Sorry. My dog that I don't actually have ate it.
  • Jaabg - Sanctuary
    Jaabg - Sanctuary Posts: 2,256 Arc User
    edited October 2012
    Docpetiot - Sanctuary wrote: »
    Financial math are still math, and you do find very tricky and nice math in it.

    That is true, what the OP posted falls in neither category but simple finance calculations. It's like asking people to solve for X and Y with 2 equations. Financial math is models, models are fun, but the OP never asked that, that is why we don't go with that being math. The models are more statistical in nature as they usually are, i doubt OP will ever reach that level in undergrad. Maybe the simple ones yes, but not the fun complex ones.

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