a. What is the market interest rate on Seaside’s debt, and what is the component cost of this debt for Corporate Cost of Capital (CCC) purposes?
b. For now, Seaside doesn’t plan to issue new shares of common stock. Using the Capital Asset Pricing Model (CAPM) approach, what is Seaside’s estimated cost of equity?
c. What is the estimated cost of equity using the discounted cash flow (DCF) approach?
d. What is the cost of equity based on the debt-cost-plus-risk-premium method?
e. What is your final estimate for the cost of equity?
f. What is Seaside’s CCC?
g. Seaside estimates that if it issues new common stock, the flotation cost will be 15 percent. Seaside incorporates the flotation costs into the DCF approach. What is the estimated cost of newly issued common stock, taking into account the flotation costs?
h. Suppose Seaside issues 30-year debt with a par value of $1,000 and a coupon rate of 14 percent, paid annually. If flotation costs are 2 percent, what is the after-tax cost of debt for the new bond?
i. What will be the CCC if Seaside issues the new common stock and the new debt, and keeps the same capital structure?
j. In general, what are the factors that affect a CCC estimate?
PROBLEM 2
Describe the following
a. DIGITAL DIIAGNOSIS RATIOS
b. Digital diagnostics common size statement of operations
c. Digital diagnostics common size balance sheet
