Detailed Question: Complete the excel file and very short answer for the questions

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Case - Financial Management

Discussion Items

1. Discuss the costs of (a) debt, (b) preferred stock, (c) common equity raised by retained earnings, and (d) cost of equity raised by issuing new stock. EXPLAIN the concepts behind the calculation of each of these in addition to what the resulting numbers mean for the business. Include a discussion on the different methods of estimating each of these costs (which do you think is best/why), the pros and cons of the different procedures, and the difficulty/reliability in obtaining the required data for inputs.

2. Calculate and explain WACC. Use the target capital structure of 15% debt, 2% preferred stock, and 83% common equity. What impact do the weights have on the WACC calculation?

3. Which of the potential capital budgeting projects indicated in Table 1 should be accepted based on WACC calculations? WHY?

4. How can PNC handle variable project risk in the WACC calculation or capital budgeting decision?

5. If PNC made a large change in its target capital structure (such as increasing equity to 100% or lowering it to 50%), how would the change impact WACC? Make sure to discuss all relevant items and components within WACC (cost of debt, preferred, and common stock).

6. If PNC decided to raise debt capital in Europe, how would it input the cost of debt and WACC? What other considerations or risk factors should be considered?

Attachment:- Case and template.rar