Only solve using excel with reference. proper steps and explanation. All parts or skip. Cost of EquityCost of DebtRisk Free Return Rate4%Probability of Default2%Market Return8%Debt yield to maturity5%Company Return10%Loss Rate40%Beta1.05Beta0.95Using the data provided,1. Apply CAPM to determine the cost of equity and the cost of debt for Cabana Cruise Line.2. Apply WACC to determine the hurdle rate that should be used by Cabana Cruise Line.Cost of EquityRequired return of security i = risk free rate + Beta x (value of equity [return of market] - risk free rate)T₁ =rf+ B₁x (E [Rmkt] -rfCost of Equity =Cost of Debtra = yield to maturity - probability of default x expected loss rateCost of Debt =WACC=Rate WACC [Equity / (Equity + Debt)]x rate of equity + [Debt/ (Equity + Debt]] x Rate of debt x (1 - tax rate)RWACC [E/ (E+D)] x RE+[D/ (E+D)] x Rpx (1-RTax)WACC = Cabana Cruise Line offers cruise ship service to various tropical locations throughout the globe. The company is considering the addition of a newcruise ship to its fleet in order to expand service to new destinations by serving additional patrons. The project involves commissioning a new ship,developing destination ports to accommodate the ship, and promotion of the new destinations. The company uses its WACC as the hurdle rate to bemet for new projects. However, since a new project has not been considered in some time, the WACC for the company needs to first be recalculated.Cabana Cruise Line uses a combination of debt and equity to fund operations, and they have a bond rating of A. Market capitalization consists of 12million shares outstanding and currently trades at a value of $51 per share. Cabana Cruise Line has outstanding debt of $150 million, a default rate of0.10%, and has a 40% tax rate. Additional information is provided in the tables below.Cost of EquityCost of DebtRisk Free Return Rate4%Probability of Default2%Market Return8%Debt yield to maturity5%Company Return10%Loss Rate40%Beta1.05Betal0.95Using the data provided,1. Apply CAPM to determine the cost of equity and the cost of debt for Cabana Cruise Line.2. Apply WACC to determine the hurdle rate that should be used by Cabana Cruise Line.Cost of EquityRequired return of security i-risk free rate + Beta x (value of equity [return of market] - risk free rate)nry+ B₁x (E [Rakt]-ryCost of Equity=Cost of Debtra = yield to maturity-probability of default x expected loss rateCost of Debt =

Cost of capital:The concept of "cost of capital" encapsulates the expense a company incurs to…

Answered: Cabana Cruise Line offers cruise ship…

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter15: International Corporate Governance And Control

Section: Chapter Questions

Problem 5QA

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