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To celebrate its success of introducing the world's first gas-insulated substation (GIS), GE will spin off an internal unit as an upstart company that designs and manufactures GIS systems under the same name, GIS. In the first year of operation 2022, GIS expects its sales to reach 500 units that sell for $2 million each. GIS shrewd management was able to keep tight control on cost through long-term and future contracts strategies. The cost to produce each system is 25% of its price. Similarly, long-term contracts are expected to keep GS&A at $50 million. GIS will have $600 million of equity funds, and a $400 million bond at a generous interest rate of 4%. GIS will aim to keep this capital structure (60% Equity-40% debt) when future capital is required. The following data is from 2022 pro forma financial statements: Shares of Common Stock Outstanding 50 million shares Depreciation $200 million Fed-to-State Tax Rate 25% Dividend Payout Ratio 5% C. a. Prepare a detailed Income Statement showing dividends and retained earnings. b. Calculate all applicable profitability ratios and debt ratios as given below. Construct Du Pont and extended Du Pont equations. d. Calculate DOL, DFL, and DCL. e Calculate book value of the stock. f. In a later stage, GIS expects to double in its initial capitalization with new external funding, which requires raising $1 billion in new external funding. The new funds will be raised to maintain the capital structure of 60% equity and 40% debt. Given rising inflation and monetary policy tightening, new bond will cost 6% and will be sold at its par value of $1000 with 3% flotation cost. Common stock is currently selling for $100 per share, and flotation costs for new common stock will be 5%. The expected dividend the year after the capital is raised is $2 per share and is expected to grow at a 5% for the foreseeable future. Calculate the weighted average cost of the new capital To celebrate its success of introducing the world's first gas-insulated substation (GIS), GE will spin off an internal unit as an upstart company that designs and manufactures GIS systems under the same name, GIS. In the first year of operation 2022, GIS expects its sales to reach 500 units that sell for $2 million each. GIS shrewd management was able to keep tight control on cost through long-term and future contracts strategies. The cost to produce each system is 25% of its price. Similarly, long-term contracts are expected to keep GS&A at $50 million. GIS will have $600 million of equity funds, and a $400 million bond at a generous interest rate of 4%. GIS will aim to keep this capital structure (60% Equity-40% debt) when future capital is required. The following data is from 2022 pro forma financial statements: Shares of Common Stock Outstanding 50 million shares Depreciation $200 million Fed-to-State Tax Rate 25% Dividend Payout Ratio 5% C. a. Prepare a detailed Income Statement showing dividends and retained earnings. b. Calculate all applicable profitability ratios and debt ratios as given below. Construct Du Pont and extended Du Pont equations. d. Calculate DOL, DFL, and DCL. e Calculate book value of the stock. f. In a later stage, GIS expects to double in its initial capitalization with new external funding, which requires raising $1 billion in new external funding. The new funds will be raised to maintain the capital structure of 60% equity and 40% debt. Given rising inflation and monetary policy tightening, new bond will cost 6% and will be sold at its par value of $1000 with 3% flotation cost. Common stock is currently selling for $100 per share, and flotation costs for new common stock will be 5%. The expected dividend the year after the capital is raised is $2 per share and is expected to grow at a 5% for the foreseeable future. Calculate the weighted average cost of the new capital

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