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1

2
3

T0
-60000000
-40000000
-5000000

T1
72000000
55000000
15000000

1
2
3

-60000000
-40000000
-5000000

72000000
55000000
15000000

Q1
Q2
Q3

Q4
Problem 1:
Q1
8.04
Q2
118.48
Q3
108.04
Q4
113.33
347.89
SUM:
20 points

NPV
$2,608,695.65
$7,826,086.96
$8,043,478.26
$118,478,260.87
$108.04
$0.00
$5,833,333.33
$7,500,000.00
$113,333,333.33

A
B
C

494 20 points NPV IRR $456.C0 -5000 -700 -400 C1 2500 450 100 C2 1500 300 150 C3 2100 400 200 -1000 -1500 700 400 650 400 ($100.306 Q7 NO Q8 0.00) 1000 Problem 2: Q5 0.111 Q6 0.37 ($4.24) 11% 31% 5% 18% 8% Problem 3: Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 .69 $327.077 0.

Problem 3: 4776 1345 5250 5342 6687 0.564 4862 0.78 30 points Problem 5: Q21 Gamma Q22 Too High .216 28262.

000.120.144.200.000.77 $ - $ (rental loss) $ $ $ $ $ Cash Flow (D) Discount Factor (E) Discounted Cash flow (DCF = D x E) $ NPV IRR $ $ Model Assumptions Inflation Tax Labor Growth (real) Cost of Capital (nominal) Rental Opportunity Cost (real) $ $ $ 525.00 (12.273.000.000.834.021.000 .96 4.837.00 $ 3.35 22% 3% 35% 2% $ - 10% 400.279.00 1.77 1 0.00) $ 1 2 Plant Equipment Salvage Depriciation Tax Shield $ Price/Fridge ($'s) (A) Cost/Fridge ($'s) (B) Fridges Sold (C) Revenue (=A x C) Production Cost (=B x C) Labor Costs (real) Labor Costs (nominal) $ $ $ $ $ $ 4.00 $ 3.000.000.400.400.000.00 2.200.400.00 4.231.600.000.760.000.000.08 2.00 $ 525.160.000.000.00 $ 4.000.800.00 $ 4.310.00 Before Tax Profit After Tax Profit $ $ 4.000.050.00 1.00 1.00 1.64 2.000.000 8.600.909090909 0.00) $ 3.Year 0 (12.000.00 2.000.000.460.00 1.00 1.000.066.000 8.00 1.243.00 2.00 2.323.040.00) $ 3.00 $ 3.36 275.000 8.236.510.393.020.000.717.876.826446281 (12.804.240.487.00 $ 4.103.861.73 $ 2.397.60 1.990.372.00 $ $ $ $ $ $ 267.472.00 1.000.00 2.546.

02 $ 292.082.41 $ 6.22 $ 2.418.632.274.776.29 $ 301.01 .126.464.57 $ 5.000.63 $ $ $ $ $ $ 5 - $ 525.070.370.387.04 1.610.25 $ $ $ $ $ $ 4.344.660.56 $ 5.683013455 0.000 9.00 2.51 1.83 0.432.223.637.218.221.002.472.390.544.816.42 1.389.208.751314801 0.304.341.00 $ 4.741.37 2.00 4.59 2.622.333.774.00 1.42 $ 284.67 $ 3.779.00 525.084.13 2.37 $ 3.670.3 $ $ $ $ $ $ $ $ 4 - $ 525.391.416.242.686.080.058.78 1.286.932.549.35 $ 3.11 $ 2.192.10 1.725.279.80 1.16 1.257.61 2.603.453.004.40 $ 5.865.000.162.552.801.31 $ 3.60 $ 3.27 $ 3.48 2.00 $ 4.311.000.14 1.56447393 $ 2.061.000 9.562.00 $ 525.620921323 0.86 2.104.411.000.82 $ 4.843.611.537.56 $ 3.502.212.93 $ $ $ $ $ $ 6 - $ $ 3.696.782.109.432.701.26 $ 310.000 8.297.159.350.80 1.27 2.000 9.996.21 1.046.965.04 $ 3.959.91 1.000.000.

QUESTION 9 and 10 4776.0206 0.0206 1000000 1020600 0 1 1.02 1000000 1.209 4776 0.02 1020000 .

0206 1063082 3 0.02 1104081 1.0206 1041624 2 0.02 1082432 1.0206 1153424 1345 .0206 1107332 5 0.02 1126162 1344697 0.0206 1130143 6 1.0206 1084981 4 0.02 1061208 1.0.02 1040400 1.

coE 0.10 0.12 ER 0.30 Corr.4 0.15 0.115 Allocation 50 70 50 .30 0.07 0.045 0.STOCK A B RF SD 0.4 0.

115 0.0.851 .146 0.