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8-2 Activity: Cost of CapitalInstructionsTo complete this assignment, review the prompt and grading rubric in the Module Eight Activity Guidelines and Rubric document. Use this worksheet to complete the second part of the activity. When you have finished your work, submit the assignment here for grading and instructor feedback.As you prepare your Module Eight – Cost of Capital assignment this week, please ensure that you complete both parts of the assignment:There is a written assignment (to be completed in a word document) that is separate from completing the worksheet (see the Rubric Guidelines - attached) which includes:Answer the following questions based on your organization chosen for the final project. Write your response in a separate Microsoft Word document:Importance of Cost of Capital: Why is cost of capital important to an organization, and what does it measure?Meaning of Calculations: How do organizations calculate various costs, and what do these calculations mean to business?Your written response should be a 1- to 2-page Microsoft Word document, double spaced, with 12-point Times New Roman font, one-inch margins, and citations in APA 7 ed. style. You must also complete and submit the Module Eight Activity Worksheet. To facilitate successful completion of both the written and problem solving portions of this week’s work, I have provided the attached template which integrates both portions of the assignment. Please also take advantage of the resources included in the Reading and Resources section that includes information and videos regarding the WACC. I have included the videos below. mba_520_module_eight_activity_guidelines_and_rubric.pdf mba_520_module_worksheet___student.docx Unformatted Attachment Preview MBA 520 Module Eight Activity Guidelines and Rubric Overview: For this task, you will explain the importance of cost of capital to organizational success and work through some calculations to understand their value. Prompt: First, review the module resources, especially Chapter 11 in the textbook. Then, address the following:   Answer the following questions based on your organization chosen for the final project. Write your response in a separate Microsoft Word document: o Importance of Cost of Capital: Why is cost of capital important to an organization, and what does it measure? o Meaning of Calculations: How do organizations calculate various costs, and what do these calculations mean to business? After completing the written portion, calculate answers to the problems in the worksheet. Refer to the textbook and other course materials to support your responses. Rubric Guidelines for Submission: Your written response should be a 1- to 2-page Microsoft Word document, double spaced, with 12-point Times New Roman font, one-inch margins, and citations in APA style. You must also complete and submit the Module Eight Activity Worksheet. Critical Elements Exemplary (100\%) Importance of Cost Meets “Proficient” criteria and of Capital demonstrates a nuanced understanding of the importance of cost of capital to an organization and what it measures Proficient (90\%) Needs Improvement (70\%) Not Evident (0\%) Value Provides a complete, clear, and accurate explanation of why cost of capital is important to a company and what it measures, and explanation is well-supported by information from the course textbook and resources Provides an explanation of why the cost of capital is important and what it measures, but the explanation is incomplete, unclear, inaccurate, or not well-supported by information from the course textbook and resources Does not provide an explanation of why cost of capital is important to an organization and what it measures 30 Meaning of Calculations Meets “Proficient” criteria and demonstrates a nuanced understanding of what the calculations mean for a business Correctly identifies all of the calculations involved in determining the various costs of capital and provides a complete, clear, and accurate explanation of what the calculations mean to business, and explanation is wellsupported by information from the course textbook and resources Identifies calculations involved in determining the various costs of capital and provides an explanation of what the calculations mean to business, but calculations are inaccurate, or explanation is incomplete, unclear, inaccurate, or not well-supported by the course textbook and resources Does not identify the calculations involved in calculating the various costs of capital or explain what they mean to a business 30 Problems Completes all assigned problems without any errors Completes all assigned problems with 1 to 5 errors Completes the assigned problems with 6 errors Does not complete the assigned problems 30 Critical Elements Articulation of Response Exemplary (100\%) Proficient (90\%) Submission is free of errors Submission has no major errors related to citations, grammar, related to citations, grammar, spelling, syntax, and organization spelling, syntax, or organization and is presented in a professional and easy-to-read format Needs Improvement (70\%) Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas Not Evident (0\%) Value Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas Total 10 100\% MBA 520 Module Eight Activity Worksheet Prompt: After reviewing the data in the problem, respond to the problems below. Indicate the answer you believe is correct. Rollins Corporation has a target capital structure consisting of 20\% debt, 20\% preferred stock, and 60\% common equity. Assume the firm has insufficient retained earnings to fund the equity portion of its capital budget. It has 20-year, 12\% semiannual coupon bonds that sell at their par value of $1,000. The firm could sell, at par, $100 preferred stock that pays a 12\% annual dividend, but flotation costs of 5\% would be incurred. Rollins’ beta is 1.2, the risk-free rate is 10\%, and the market risk premium is 5\%. Rollins is a constant growth firm that just paid a dividend of $2.00, sells for $27.00 per share, and has a growth rate of 8\%. The firm’s policy is to use a risk premium of 4\% when using the bondyield-plus-risk-premium method to find rs. Flotation costs on new common stock total 10\%, and the firm’s marginal tax rate is 40\%. Cost of debt 1. What is Rollins’ component cost of debt? a. b. c. d. e. 10.0\% 9.1\% 8.6\% 8.0\% 7.2\% 2. What is Rollins’ cost of preferred stock? a. b. c. d. e. 10.0\% 11.0\% 12.0\% 12.6\% 13.2\% 3. What is Rollins’ cost of retained earnings using the CAPM approach? a. b. c. d. e. 13.6\% 14.1\% 16.0\% 16.6\% 16.9\% 4. What is the firm’s cost of retained earnings using the DCF approach? a. 13.6\% b. 14.1\% c. 16.0\% 5. What is Rollins’ cost of retained earnings using the bond-yield-plus-risk-premium approach? a. b. c. d. e. 13.6\% 14.1\% 16.0\% 16.6\% 16.9\% 6. What is Rollins’ WACC, if the firm has insufficient retained earnings to fund the equity portion of its capital budget? a. b. c. d. e. 13.6\% 14.1\% 16.0\% 16.6\% 16.9\% ... Purchase answer to see full attachment