Medical Associates is a large for-profit group practice. Its dividends are expected to grow at a constant rate of 7% per year into the foreseeable future. The firm’s last dividend (D0) was $2, and its current stock price is $23. The firm’s beta coefficient is 1.6; the rate of return on 20-year T-bonds currently is 9%; the expected rate of return is 13%. The firm’s target capital structure calls for 50% debt financing, the interest rate required on the business’s new debt is 10%, and its tax rate is 40%.,,,,You are to write a 3-6 page report that answers the following:,,1. Calculate Medical Associates’ cost of equity estimate using the DCF method.,,2. Calculate the cost of equity estimate using CAPM.,,3. On the basis of your answers to #1 & #2, what is your final estimate for the firm’s cost of equity?,,4. Calculate the firm’s estimate for corporate cost of capital.,,5. Describe the four (4) steps of capital budgeting analysis.,,6. Describe how is project risk is incorporated into a capital budgeting analysis.,,The format of the report is to be as follows:,o Typed, double spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format.,o Type the question followed by your answer to the question.,o In addition to the 3-6 pages required, a title page is to be included. The title page is to contain the title of the assignment, your name, the instructor’s name, the course title, and the date.,,
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