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Can you please explain in a summary of (one or two paragraphs) how you get the answer of section A to G. I have the answer but I need more foreclosure on how you get the answer (the procedure or lets say the steps you used to get the answer)

Can you please explain in a summary of (one or two paragraphs) how you get the answer of section A to G. I have the answer but I need more foreclosure on how you get the answer (the procedure or lets say the steps you used to get the answer)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Can you please explain in a summary of (one or two paragraphs) how you get the answer of section A to G. I have the answer but I need more foreclosure on how you get the answer (the procedure or lets say the steps you used to get the answer)

Historical returns Date Company returns Market returns Company risk premium Market risk premium 11/6/2018 1.08% 0.63% 1.08% 0.62% 11/7/2018 3.03% 2.12% 3.03% 2.12% 11/8/2018 -0.35% -0.25% -0.35% -0.26% 11/9/2018 -1.93% -0.92% -1.93% -0.93% 11/12/2018 -5.04% -1.97% -5.04% -1.98% 11/13/2018 -1.00% -0.15% -1.00% -0.15% 11/14/2018 -2,82% -0.76% -2.83% -0.76% 11/15/2018 2.47% 1.06% 2.46% 1.05% 11/16/2018 1.11% 0.22% 1.10% 0.22% 11/19/2018 -3.96% -1.66% -3.97% -1.67% 11/20/2018 -4.78% -1.82% -4.78% -1,82% 11/21/2018 -0.11% 0.30% -0.12% 0.30% 11/23/2018 -2.54% -0.66% -2.55% -0.66% 11/26/2018 1.35% 1.55% 1.35% 1.55% 11/27/2018 -0.22% 0.33% -0.22% 0.32% 11/28/2018 3.85% 2.30% 3.84% 2.29% 11/29/2018 -0.77% -0.22% -0.77% -0.22% 11/30/2018 -0.54% 0.82% -0.55% 0.81% 12/3/2018 3.49% 1.09% 3.49% 1.09% 12/4/2018 -4.40% -3.24% -4.40% -3.24% 12/6/2018 12/7/2018 -1.11% -0.15% -1.12% -0.16% -3.57% -2.33% -3.57% -2.34% 12/10/2018 0.66% 0.18% 0.65% 0.17% 12/11/2018 -0.57% -0.04% -0.58% -0.04% 12/12/2018 0.28% 0.54% 0.27% 0.54% 12/13/2018 1.09% -0.02% 1.09% -0.03% 12/14/2018 -3.20% -1.91% -3.21% -1.91% 12/17/2018 -0.93% -2.08% -0.94% -2.08% 12/18/2018 1.30% 0.01% 1.29% 0.00% 12/19/2018 -3.12% -1.54% -3.12% -1.55% 12/20/2018 -2,52% -1.58% -2.53% -1.58% 12/21/2018 -3.89% -2.06% -3.90% -2.06% 12/24/2018 -2.59% -2.71% -2.59% -2.72% 12/26/2018 7.04% 4.96% 7.04% 4.95% 12/27/2018 12/28/2018 -0.65% 0.86% -0.65% 0.85% 0.05% -0.12% 0.05% -0.13% 12/31/2018 0.97% 0.85% 0.96% 0.84% 1/2/2019 1/3/2019 0.11% 0.13% 0.11% 0.12% -9.96% -2.48% -9.97% -2.48% 1/4/2019 4.27% 3.43% 4.26% 3.43% 1/7/2019 -0.22% 0.70% -0.23% 0.70% 1/8/2019 1.91% 0.97% 1.90% 0.96% 1/9/2019 1.70% 0.41% 1.69% 0.40% 1/10/2019 1/11/2019 0.32% 0.45% 0.31% 0.45% -0.98% -0.01% -0.99% -0.02% 1/14/2019 -1.50% -0.53% -1.51% -0.53% 1/15/2019 2.05% 1.07% 2.04% 1.07% 1/16/2019 1/17/2019 1/18/2019 1.22% 0.22% 1.22% 0.22% 0.59% 0.76% 0.59% 0.75% 0.62% 1.32% 0.61% 1.31% 1/22/2019 -2,24% -1.42% -2.25% -1.42% 1/23/2019 0.40% 0.22% 0.40% 0.21% 1/24/2019 -0.79% 0.14% -0.80% 0.13% 1/25/2019 3.31% 0.85% 3.31% 0.84% 1/28/2019 -0.93% -0.78% -0.93% -0.79% 1/29/2019 -1.04% -0.15% -1.04% -0.15% 1/30/2019 6.83% 1.55% 6.83% 1.55% 1/31/2019 0.72% 0.86% 0.71% 0.85% 2/1/2019 0.05% 0.09% 0.04% 0.08%
Transcribed Image Text:Historical returns Date Company returns Market returns Company risk premium Market risk premium 11/6/2018 1.08% 0.63% 1.08% 0.62% 11/7/2018 3.03% 2.12% 3.03% 2.12% 11/8/2018 -0.35% -0.25% -0.35% -0.26% 11/9/2018 -1.93% -0.92% -1.93% -0.93% 11/12/2018 -5.04% -1.97% -5.04% -1.98% 11/13/2018 -1.00% -0.15% -1.00% -0.15% 11/14/2018 -2,82% -0.76% -2.83% -0.76% 11/15/2018 2.47% 1.06% 2.46% 1.05% 11/16/2018 1.11% 0.22% 1.10% 0.22% 11/19/2018 -3.96% -1.66% -3.97% -1.67% 11/20/2018 -4.78% -1.82% -4.78% -1,82% 11/21/2018 -0.11% 0.30% -0.12% 0.30% 11/23/2018 -2.54% -0.66% -2.55% -0.66% 11/26/2018 1.35% 1.55% 1.35% 1.55% 11/27/2018 -0.22% 0.33% -0.22% 0.32% 11/28/2018 3.85% 2.30% 3.84% 2.29% 11/29/2018 -0.77% -0.22% -0.77% -0.22% 11/30/2018 -0.54% 0.82% -0.55% 0.81% 12/3/2018 3.49% 1.09% 3.49% 1.09% 12/4/2018 -4.40% -3.24% -4.40% -3.24% 12/6/2018 12/7/2018 -1.11% -0.15% -1.12% -0.16% -3.57% -2.33% -3.57% -2.34% 12/10/2018 0.66% 0.18% 0.65% 0.17% 12/11/2018 -0.57% -0.04% -0.58% -0.04% 12/12/2018 0.28% 0.54% 0.27% 0.54% 12/13/2018 1.09% -0.02% 1.09% -0.03% 12/14/2018 -3.20% -1.91% -3.21% -1.91% 12/17/2018 -0.93% -2.08% -0.94% -2.08% 12/18/2018 1.30% 0.01% 1.29% 0.00% 12/19/2018 -3.12% -1.54% -3.12% -1.55% 12/20/2018 -2,52% -1.58% -2.53% -1.58% 12/21/2018 -3.89% -2.06% -3.90% -2.06% 12/24/2018 -2.59% -2.71% -2.59% -2.72% 12/26/2018 7.04% 4.96% 7.04% 4.95% 12/27/2018 12/28/2018 -0.65% 0.86% -0.65% 0.85% 0.05% -0.12% 0.05% -0.13% 12/31/2018 0.97% 0.85% 0.96% 0.84% 1/2/2019 1/3/2019 0.11% 0.13% 0.11% 0.12% -9.96% -2.48% -9.97% -2.48% 1/4/2019 4.27% 3.43% 4.26% 3.43% 1/7/2019 -0.22% 0.70% -0.23% 0.70% 1/8/2019 1.91% 0.97% 1.90% 0.96% 1/9/2019 1.70% 0.41% 1.69% 0.40% 1/10/2019 1/11/2019 0.32% 0.45% 0.31% 0.45% -0.98% -0.01% -0.99% -0.02% 1/14/2019 -1.50% -0.53% -1.51% -0.53% 1/15/2019 2.05% 1.07% 2.04% 1.07% 1/16/2019 1/17/2019 1/18/2019 1.22% 0.22% 1.22% 0.22% 0.59% 0.76% 0.59% 0.75% 0.62% 1.32% 0.61% 1.31% 1/22/2019 -2,24% -1.42% -2.25% -1.42% 1/23/2019 0.40% 0.22% 0.40% 0.21% 1/24/2019 -0.79% 0.14% -0.80% 0.13% 1/25/2019 3.31% 0.85% 3.31% 0.84% 1/28/2019 -0.93% -0.78% -0.93% -0.79% 1/29/2019 -1.04% -0.15% -1.04% -0.15% 1/30/2019 6.83% 1.55% 6.83% 1.55% 1/31/2019 0.72% 0.86% 0.71% 0.85% 2/1/2019 0.05% 0.09% 0.04% 0.08%
1. NPV analysis EXYZ forecasts the following for its future operati ons. a) Annual sale of 100,000 memberships at $75 each. b) Cost of goods sold of $25 for each membership. c) Operating expenses of $3,000,000 per year. d) Assume zero net working capital requirements (0 inventory, accounts receivable/payable, and cash). e) An initial inves tment at the beginning of $7,500,000 on servers and computers, which will be depreciated straight-line to zero over the next 7 years. f) Tax rate is 35%. E) The investment horizon is assumed to be 7 years. After 7 years, this company's free cash flows will teminate. No liquidation value is assumed given the nature of company. Parameters Market value Stock price (as of today) Number of shares (as of today) 166.52 4,730,000,000 Market Capitalization (as of today) 2$ 787,639,600,000 Market value of debt $ 114,730,000,000 Total financing 2$ 902,369,600,000 Cost of capital Daily risk-free rate 0.0055% Estimated future market return 0.0137% Beta using past three months daily returns 1.68 Estimated cost of equity 7.30% Estimated cost of debt (annual interest rate on debt) 5% Tax rate 35% WACC 6.79%
Transcribed Image Text:1. NPV analysis EXYZ forecasts the following for its future operati ons. a) Annual sale of 100,000 memberships at $75 each. b) Cost of goods sold of $25 for each membership. c) Operating expenses of $3,000,000 per year. d) Assume zero net working capital requirements (0 inventory, accounts receivable/payable, and cash). e) An initial inves tment at the beginning of $7,500,000 on servers and computers, which will be depreciated straight-line to zero over the next 7 years. f) Tax rate is 35%. E) The investment horizon is assumed to be 7 years. After 7 years, this company's free cash flows will teminate. No liquidation value is assumed given the nature of company. Parameters Market value Stock price (as of today) Number of shares (as of today) 166.52 4,730,000,000 Market Capitalization (as of today) 2$ 787,639,600,000 Market value of debt $ 114,730,000,000 Total financing 2$ 902,369,600,000 Cost of capital Daily risk-free rate 0.0055% Estimated future market return 0.0137% Beta using past three months daily returns 1.68 Estimated cost of equity 7.30% Estimated cost of debt (annual interest rate on debt) 5% Tax rate 35% WACC 6.79%
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