a) E(R1) 0.

2
=
0.08
+ 0.4
+
0.12 0.4 0.15:-0.124:12.4%
x
=
+

E(RB) 0.2
=
0.1
x 0.4 x0.06
+
+0.4+0.14 8.1 10%
=
=

b/ Vara
6 =

=0.2 (0.08 -0.124)+0.4

+
+(0.18-0.124) 0.4
=
10.15.0.124)
x

4
18 0.00066 = r 0.02577
-

6.64
=
x = =

E:Var
=0.02,(0.1-10%) 0.4 (0.06-10%) 0.4, (0.14-10%)"
+

= +

=0.00128
=>) B 0.03578
=

c) ECR)p 0.9 12.4%

=
x
0.7
+
10%:10.72%
x

d/ State
0.2x(0.08 -0.124) (0.1-0.1)

0
1. -> +

2. -> 0.4x(0.12 -0.124) (8.06 -0.1) x

3. -> 0.4,(0.15-0.124) (0.14-0.1)

+

↳ A
=

? Ws
=
2
+

WAW YA, Wis B (30%)

+

=
 -> preferred stack devidend

nxgia
%=
-
olg c) the MPV of the project
cha1
thing

alMVD 600,000 100x0.95=57,000,000

=
x $

MV =350,000 90 x
31,500,000$
=

MV=a=1,500,000, 60 90,000,000
= $

MV=57,000,000 315,000,000 90,000,000 $178,500,000

+

+
=

57,000,000
Wp =
32%
=

178,500,000

W19 31,500,000
=

178,500,000
W 90,000,000
-
25 =

178,500,000

b/ WACC WD
=

Ry (1-tan) WExR+ Wpx R-prefferred

x
+
stock
↳ common
g'c
Cost of debt stock chic
Ry YTM
=

>year -

(Ice93:2)sy-g
=

R =
=

1.25 x 8% 14%
Rc 41.
+
= =

/M1V -680,000
(
it
=
182,000
+
 ⑳

a) Unfevered firm (alt-equity)

EBIT
E1Su =

5,000,000

Levered firm (debt)

EBIT-30,000,000 8% (Guered firm)
E1S
+

5,000,000-200,000

==>ElSu EPS, (giaphtrint)

=

EBIT
=> = 6,000,000

e
b/E1S=0
al
 WACC Wi R (1- tax) Wr RE WeeR
=

x
+ +

50,000 1,000 x104.3%:$52,250,000

MY, =
x

MVD.: 30,000 10,000 29.6%

x x
$70,000,000
=

MVp=235,000,87 20,445,000
=

MVc 2,100,000 79:$165,900,000

=
+

MV
=
309,995,000

WD, 0.17
=

WD, 0.25 =

0.066
We =

seanramM)
We 0.54 =

RG1 YTM,
**:
=

Oanee
)-
I I
1,000
1 (1+ 102,3/1,000
()
-

↓
M 11xMy
+

r. YIM YTM1
=> 0.0468
=

RD =YTM. =-

)
25.6%,10,000 - 23.6%. x10,000 N =
= =4.2H
K

ia. 1 0.024 2
f
-
+ =

YTMo
 R1 Gv 7 0.87 8.7%
=
= =

Rc 9.6% 1.08 7%,

=
+
+
= 0.1116 1.164=

a) E(RA) 0.25 +0.13=

+ 0.6x0.08 0.15x0.02 0.0835
+

= 8.35%
=

E(RB) 0.29 0.25 0.11 x0.6 0.15 (-0.18) 0.1115 1.15

+
+
=
x
=
=
+

E(R1) 0.25 8.6 =

x
0.6 x0.13 0.15
+
+
x (-0.43) 0.1605
= 16.05%
=

0.0833 40%, +0.1115 x40% 0.1605 x20% 0.1101 1.81%

E(R(p
=
+

x =
=

E var A
=0.25(0.19-8.35%)"
=

0.6(0.08-8.35%) 0.1510.82-8.95%,
+
+

0.0015275
=

r
=> 0
5275
=
0.54
=

Ji war = 0.h
=0.2518.29-1.5i) 0.6108-11.5D." 0.15(-0.18-11.5)" = =

=0.020725
5B 0.020725:0.144:14.4%
-> =

v =

y,(0.6-16.85%) 0.6(0.13-16.05%)"
=
+
0.15(-0.45-16.05%.)"
0.10475475
=

=>
5c N75hES 0.32 32.4%
= = =
b/ expected rist premium E(R)- =

t-bills) 1.01%-5.7%
= 7.91%
=

of approximate expected real expected return 3.3%

return:
inflation:
11.01%
- -

=
7.71%
expected reatrisk premium:rish premium-inflation 1.91%-3.3%= 4.01%
=

a) Unteverred firm (all-equity)

EBIT
El Su = =300,000:2.07%
share of stocks 145,000

Levered firm (debt)

8%
debt
debtate 300,000 716,000
x

EPS, Ex
x
-

=
I
=

145,000
stuck share
a) E(R) 0.25 0.24
=
x 0.4 x0.89 +0.3 0.03 +D.05,(-0.05) 0.1025 10.251.
+ +
=
=

E(R) y 0.25 0.45 0.4 0.1

=
x
+
+ 0.3
+

(-0.1)
x 0.03 x(-0.25)
+

=
0.11 11%
=

E(R), 4.25 0.33

= x
+0.4 0.15 0.3
x
+

x (-0.05) 0.05
+

(-0.09) 0.123
x = 12.5%
=

E(R)1:10.25%x90% 12.3%,30% 11%. 40% +

+

x 0.11165 11.165%
=
=

a) Boom 0.9, 0.24 +0.4 x0.45 0.3 0.33 = 0.351=

=
55.1% +

0.9x0.09
Good: 0.4 0.1 0.3x0.15=0.112 11.2%
+
+
+
=

Loor: 0.9x0.03 0.4 x(-0.1) 0.3 (-0.85): -0.046=- 4.6%

+
+
+

Bust 0.3 (-0.05) 0.4 (-0.25) 0.3,(-0.09) = -0.142=-14. 2%

=
=
+
x
+

E(R)1 0.25 x35. 1%

=
0.4,11.2%
+
(- 4.6%):0.3+
+ (-1.21.) 0.05:0.117
x 1.71.
=

b) I:warl
=0.25,(35.11.
-

11.7%!" 0.4
-

+ (11.2% -

11.7%. 0.9 (-4.6%

+

-1.71)20.05(-14.2:-m.
=0.025
= 0.158=15.8%.
I 0.025
=
=
 995 370 420 ↳55
70 848 918 978
705
-
790 875 940
-
-
-

370 420 433 485

cash collection 535 705

1,740
+
=
=

Ending receivable 595 748 -705:370

: +
1) Diedend yield:dividend per share
I
1.65 0.02 2%
= =

share price 89

Capital gains:initial price 83 74 =0.1216 12.16%

-

- =

price of stock z

Total return:(Ending share price -

initial price) +Dividend -
100
initial price

= (88 - 74) 1.65 =

x
14.39%
100:
The

a/a/amount of yearly
compon 6"
=
1000 $60
x =

total dollar return value:setting price yearly compon-

purchaseprice year ago
+
1

1,025
=
- 60

- $75

b/ Mominal rate
of return:dollar return value 75
=
0.07426 7.4126%
=
=

purchase price 1 year ago 1,010

c n nominal
=
interest rate
i inflation
=
rate

r rate of return
=

(1 n) (1 r)x(1 i)
+

=
+
+

() (1 7.426%) (1 r)x(1 3%)

+ =
+
-

= r 0.043:4.3%
=
 E(k)1 0.15 +0.04
=
0.55x0.09 +0.3 0.17 0.1065 10.65%
+

x =
=

E(R), =
0.15 x70.17) 0.55+
x 0.12 0.3
+
x 0.27:0.1215 12.15%
=

&=var A
0.9 (0.17-10.65%)"
+
=0.15(0.04 -10.65%) 0.55(0.09-10.65.)" =

=0.00202
- Ja 0.00202
=
0.045 4.5:
=

TB war 2
(0.12-12.15%) 0.5 (0.27-12.15%)
=

+
=0.151-0.17-12.15%) 0.55
=

I 0.01936175
0.01936275 0.14 141.
TB
=

=
=> =
 a) Chase
MAL= payment-satrage nature) (Aurchase price Tan
benefits, So tien ko pha
-
-

(net advantage ↳
to lease) Giatri con la bhi hit chiu do this
sa
period

depreciated straight-line to zero over

years
5 - satrage value 0 =

cost

system
9,400,000 $1,880,0
depreciation of one year: =
-

tan
benefit depreciation
=
xtan rate:
1,800,000 23% +
= $432,400

Aftertain coupon rate:(1-tanrate) Rd (1 +

=
-
23%),9% 0.0693 =

x(1-(1+0.0695) )
-

IV:tax benefit 432,400

=
...
x
$1176,153.268
=

0.0693

AV-cost:
MIV= $1,776,253.268 -$9,400,000 $ 7,623,746.732
=
-

1-(1+artate)* (1-aftertai
I
rate)
IV of lease payment--value for leaving (I-tan after tan
...
....

3
=- 2,050,000x(1 23%) -
1 (1 0.0693)-
x
-
+

+(1 0.0693)
+

0.0693
$
= -

6,933,673.097
MAL=1V of lease payment -
MIV

$ 6,933,679.027
=>

-
-

( 7,623,746.7327
-

$690,073.70h7
=
 E(R)1 4,450
=
8%, 0.025:
x 2.5%=

9,680 +
4,450

E(R)B 9,680
=

11%
x
0.075=
=
7.5%

9,680 4,450
+

E(R) 1:2. 5% 7.5% 101

+
=

E(k)1 0.15 +0.04

=
0.55x0.09 +0.3 0.17 0.1065 10.65%
+

x =
=

E(R), =
0.15 x70.17) 0.55 +
x 0.12 0.3
+
x 0.27:0.1215 12.15%
=

&=var A
0.9 (0.17-10.65%)"
+
=0.15(0.04 -10.65%) 0.55(0.09-10.65.)" =

=0.00202
- Ja 0.00202
=
0.045 4.5:
=

TB war 2
(0.12-12.15%) 0.5 (0.27-12.15%)
=

+
=0.151-0.17-12.15%) 0.55
=

I 0.01936175
0.01936275 0.14 141.
TB
=

=
=> =
 ECR) 0.15
=
(-0.184)
x = -0.0276 =-2.76%
epression

E(R) Recession 0.3 0.029

= x
=
0.0087=
0.87%

E(R) normal 0.45 0.173 0.07785:

= x 7.785% =

E(R) =
3.72%
0.1x0.572:0.0372:
Boar

E(R) =
-

2.76% +
+

9.615%
0.87% 7.785% 3.72%.= +

r =war
=0.13(-0.184-9.615)." D. 3(0.029-9.615%)
-
0.45(0.173-9.615;)"
-

0.1(0.372 -
9.615%)2

-) r 0.0234 = 0 0.15 15%

=
=

=
1/ CAM1:Ry R x (Rm xRF)
= +

3.4%. +1.07
=

(11%-3.4%) 0.11532
+
=
1.532%
=

2/ Band Price Formula:2x1- 4+r) +

-

r Er)
3.2

5 1000x 1
x
-

4 E).
+

1000 96% x1,000

-

t
e

= & )
-

r 0.053
-> =

5.3'
-
 Mc 20,000 2,000
= x
x 105%:$42,000,000

Mc 900,000 = 77
+
=
$69,500,000

Mr 42,000,000 69,300,000 $111,300,000

=
+
=

42,000,000 0.977:97.7%
W =
=

111,500,000

W 69,300,000 62.5%
C
=

=0.623 =

111,300,000

- n.2
FV
Band rice 2x =
1-(1+) I

- (1 E).2
+

20.2
E) 2,000
-

5.1 x
4800 x
1 -

(1 +

2,000
=

2
E
(1
I)c0.2
+

=r 0.051
RD
=
-
=

Rc R=risk-free raterisk 70
=

premium e
0.95
x 0.1015:10.15%
=

WACC Wp Ry (1
=

x
- tax) WexRE+Wp Re
+

=37.7%x5. 1%(1-21%) 62.3%. 10.15% +

7.8%
=0.078:
al
Economic conditions normat Percentage changes in EDS when the company
*
are *

expands
E1S=18,000 2.43%
=
3. 8r1. =

2.43%: 0.61%
7,400

Strong
*

expansion in the
economy Company
=>
increases 0.61%

E19:18,000 x 25%) 18,000

3.04%
*

Lercentage changes in 115 whenthe company

+

7,400 enter a recession

* Recession in the economy 1.7% -2.481 = -0.0079%

(19 18,000 -(18,000 50%): = decreases 0.0073%

1.7), Company
x
=

7,400

b) WithDebt

Marmal
Lercentage change
* in
expansion
*

2.47% -1.86% 0.61

E1S= EBIT-(debt debt
rate) =

stock share
Company
I increases 0.61%

160,000 7%)
18,000
=
- +

1.86%.
=
A
fercentage change in recession
7,400
*
Expansion 1. 141-1.86% -0.72%
=

E1S EBIT -(debtx debtrate)

=

=> Company decrease 0, 72%

stock share
=(18,000 25%) 18,000
+ +

I
-

160,000 +
7i.) 2.471 =

7,400
*
Recessio

EPS:EBIT
-
(debt debt -
rate)
stock share

18,000-118,000 x30%) -
160,000,11) 1.14% =
=

7,400
al unteverred plan (att -

equity)
ElSu EBIT=

:300,000 2.07%
=

stock share outstanding 145,000

Leverred plan
EPS:EBIT (debt,debtrate)
-

300,000 -(716,000 8%) x

1.94%
= =

stock share
outstanding 125,000

> Unteverred plan is

higher
b / unhverred plan
E18:EBIT
stock share outstanding 2000 4.14. =

neverred plan
EDS:EBIT
-

(debtxdebtrate) 600,000 -(716,000 8%) 4.3%

=
x

stock share 1 25,000

outstanding
I neverred is higher
c) Break-even EBI

EBIT -(716,000 8%)

EBIT => ABIT $415,280
x =
=

145,000 125,000

MM Proposition 1:Vi Vn t, butnotan-> V Vn =

+ =

share price:Debt outstanding 716,000

=

=$35.8 per share

stock
planningplant
-
2 145,000 125,000 =

the value of company under all

equity plan & feverred plan is

V V, =
55.8
=
145,00035.8,125,000 716,000 $5,191,000
x + =
value EBIT+ (1-tan)
of company:
cost
of equity
125,000,(1
=
-
24%) $791,666.6667
=

12%

value (1-tax)
of company:unteverred debt
+

791,666.6667 205,000/1- 24%)

=
+

$947,466.6667
=
1/
a) E(R)1 : Probability stockA - 0.2
=
x 0.08 0.4 0.12
+
+
0.4x0.15=0.124
+

=
12. 1 1.

E(R) 0.2 0.1 0.4x0.06 +0.4 0.1

=
x
+
x
0.1:10%
=

b) I warA:
=
(stack A
Probability expected return of stock Al -

- 0.2 x 10.08-12.4% 0.4(0.12-12.4%)+0.4(0.15-12.4%.)2 +

4
6.64
-

~ x 10
0.026
-

6.64 10
T1
x
=

=
=>

-=ar 40.1-12.4")" + 0.4(0.06-12. 2)" =0.4(0.14-12.4%)

3
1.856 16
-

x
=

7 (B 1.856 10
=

x
-
3
0.043
=

x90% 10%x70% 10.78%

c)ECR)1=12.41.
=
+

d) Recession 0.08 30% +0.1x70%.

=
x
0.094=9.4%
=

Normal 0.12+30% = +0.06 x70%: 0.078:7.8%

Boom 0.15,30% :
+
0.14 +70%.=0.143:14.3%

10.72%
E(RIP 0.2,9.4% 0.4 7.8% 0.4x14.3%
+
+

=
x =

I: ward 2

=0.219.4%-10.72%) =0.4(7.8%.-10.79%) =0.4 (14.3%-10.72)

4
8.94504 10
-

=
x

T1 8.34304x10-4
=
0.03
=
 al $57,000,000
MVD 600,000 x100 x95%. =
=

MVp 650,000 90 $31,500,000

=
x
=

MVc 1,500,000 =

60
x
$90,000,000
=

MVr=57,000,000 31,500,000 90,000,000 $178,500,000 + +

57,000,000
b/ WD =
0.919: 32%
=

178,500,000

31,500,000 18%
Wp
=
=

178,500,000

W 90,000,000
=

=50%
178,500,000
-

Ros
1 21= -
(1 Rg)+

EPrice quote Ris

x par value

(-95
8
=

100
x

-
1 -
x+
RD
25.2 19= +

Rx 8.21.
=

R1 0 2 10%
= =

R
=-R) 4%. = +

1.25(8%-4%.)=9%
WACC Wp Ry (1- tax)= x
WexRc Np Re
+ +
+

=32%.x (1 -

211) 50%. 9%. 18%. 101

+
x
+
+

-
 all
a) equity
ERS=EBIT EBIT
share
outstanding 5,000,000
everred
firm -

o?
ES=EBIT (debtxdebtrate)
x
EBIT +(30,000,000 8%.)
=
x

share outstanding 5,000,000

Break-even feret:

EBIT EBIT + 190,000,000,81.)

() = E
5,000,000 5,000,000
30 days => 1/5

Qu Qe QS Q4
Begin ast 962.5 1,250 1,068 925
-

purchases 1,845 1,598 1,387.51462.5

(73% 2,460)
+

payment of AP 1,577.5 1,760 1,582.5 1,412.5

Ending payable 1230 1,060 925 975

Beginning payable Q, this year:pending 1

of Q4 last year

- A x
Purchases,Qu last year
90

- 60 75%
x
x
1,925
90
I 962.5

Qu Q2 Q5 Qu
Payment of t 1,577.5 1,760 1, 522.5 1,412.5
accou

wages, taxes and

other accounts 385 492 424 370

Longterm financing 110

118 110 110
expense
 a) Rs Pr Bx risk 4% 1.2x7%= 12.4%
premium
+ +
=
=

4 5] +
R)
-

b/1 2 (1
- +

+
=

1, I
[1 Rp)
+

() 17.5 x1,000 1,000 =

=> RDo:5.9%
(
Rey2.so
+

cost of debt
after tan:G -
tax rate) Ryo (1x
=
-
40%) x5.9% 3.54% =

[ (1RD) I Re
-

I e 1
=
x
-

5;71000/1- cy+e)
106,541,000 =

RD 1 5.17%
=>
=

Cost
of debt
aftertan:()-tanrate) Ry (1 48%) 5.17% 3.102%
- =
+
x =

2/ MVD, 17.5%,1,000 =

200,000 $35,000,000
+
=

MVD, =
106,5%. x 1,000 50,000:$55,250,000
x

MV=165000 79
x
$9,875,000
=

MV, 2,300,000 +65

=
$149,500,000
=

MVr=35,000,000 +
53,250,000 + 9,875,000 149,500,000 +

=$247,625,000

We. 3,888:14.13% W1 9,875,000 41

=
=
=

247,625,000

Wyn 53,250,000
=

= 21.5% We= 149,500,000 60.4% =

247,625,000 247,625,000
 47
3.06%.
Rp
=
=

WACC RD, =

W,(S-tan):R, Wy.(1-tan) R, +

We
+ +
Rp x
WI
S. 17%, 21.5%(1 -40%) 5.9%.x 14.13%.(1 407) 12.4%.x60.4%. + 3.041. 41+
=
-
x
+

= 8.86%

a) All-equity plan (unteverred plan)

E1S EBIT
= 749,000
=
2.38$
=

stock
share
of 315,000

Leverred plan

EPS:EBIT -(debt,debtrate) 1.49

No
10%)
10,000
+

- =

share of stock

Plan EISy
- have higher EIS

b) All-equity plan
ES:Bit 1,748,000
=

5.55$
=

share of Mack 915,000

Leverred plan

(debt+ debt rate)

E19,:EBIT 1,748,000- (4,140,000 10%)= 5.93$
-
x

of stock
=

share 25,000

Than EIS, have higher IS

=>

c) break-even level of EBit

EBII
=EBIT-(4,140,000 10%) x

=)
EBIT $1,449,000
=

315,000 225,000
aspected return of Boom 20%x0.12 40%x0.35 25%. x0.23 15%x 0.3
=
+
+
+

29.65%
=

0.12 x40% 25%x0.13 15%,0.05

Good:0.09 20%
+

x + +

10.6%
=

foar 20%x0.02
= +
40%x(-0.1) 25%.
+
x(-0.03) +

15%x(-0.2)
I
-
7.75%

Burt 20%x(-0.09)
=

40%x
+

(-0.19) 25%) -0.08) 15%x(-0.3)

+
+

=- 15.9%

E()1 0.3 29.65%. 0.35 x10.6% (- 7.75%) 0.25 0.1

=
x
+ +
x
+

(- 15.9%)
x

=9.08%

b/ J war
= 7
I

=0.3 (29.65%-9.08% 0.35x(10.6%.-9,081*0.25x (-7.75

+

2
+

-> 0.1(-15.9%-9.08%)

=0.026
0.026 16.15
I
-> =

=
 discountratex (1-tax) 8%.x(1-55%) 5.21
correct discount rate: =

afterleaseputto33%
$89,
he

$942,500
=

Lease O 1 2 3 d

After tan lease payment

=Clease pint x (1- taal)
-

1,098,500
-

1,098,500
-

1,098,500 -
1,098,500
total cash flow (hase) -

1,098,500
-

1,098,500
-

1,098,500
-

1,098,500
-

Buy
cost of machine
-

$5,800,000

depreciation tan shield $941,500 942,500942,500 942,500

total cashflow (buy) -

5,800,000942,500942,500 942,500 942,500

Cash flow (lease-buy) 5,800,000 -2,041,000 -2,041,000 -2,041,000 -2,021,000

(1 5.2%)
-

2,041,000 1
- +

Present value when leasing 5,800,000

:
-
+
=
-
1,409,797.97
5. Lil

Men Buy
=> in leasing an
correctdiscount rate:
discount rate y (1-tax) =

9% (1-95%) =
5.85%

After tan lease pit lease prt -(1-tax)

=
= 190,000 (1-35%): $84,500
x

depreciation tan shield:480,000,35% =

$33,600
S

Leae ⑧ L 2 3 I
-

After tan base put -

84,500-84,500 -

84,500
-

84,500

total cash flow (leasing) -

84,500-84,500 -
8,500-84,500 -

Buy
cost of machine -
480,000

depreciation tan shield 33,600 39,60033,600 33,600

total cashflow -

480,000 33,600 33,600 33,600 33,600

Cash flow (lease buy)

-
480,000 -
18,100
-

118,100 -

118,100
-

118,100

Present value when hearing 480,000 -118,100 1-(1 3.85%)3 $- 19,516.78

+
=
= x

3.85%

Buy
->
 a) E(R) 1 0.2 0.08 +0.4 x0.12 0.4
=
x
+
0.15
+

12.4%
=

E(R(p 0.2 0.1 0.4x0.06 0.4 0.14

+

+
=
x x

10%
=

dE(R)=12.4%. 50%-101x70% +

10.72%
=

b/ Tx rarA
=0.2(0.08-12.4%) 40.4 (0.15-12.4%)"
=

4
-0.4(0.12-12.4%) 6.64 10
-

x
=

T1 0.026
-> =

Or=war B
=0.2 (0.1-10.72%)+0.4(0.06-18.72%) 0.4 (0.14-10.72%)"
=

1.33
=

=) 5B 0.036
=

recession--8str.20
a 3.6% stake it
=

Boom
I

T1 ar243.6%.-10.72%) 0.4 (7.2%-10,72%)-0.4 (11.6%-10.72%)

=
+

1.54
=

T1
=> =

3.9%
a/ MY 600,000 95%. = x x100 $57,000,000
=

MV1=350,000 90 x $91,500,000
=

MVc 1,500,000
=

x 60 $90,000,000
=

My 57,000,000 31,500,000 90,000,000 $178,500,000

=
=
+ +

WD 57,000,000
=

3.19%
=

178,500,000
31,500,000 17.6%
We = =

178,500,000

WC 90,000,000 50.4%
=
=

178,500,000

ex(1 2") -y
-

Ex)
P =
-

2 100x [1- )-- Ry 8.89%

95/100 =
x
=> =

Rc R
=

= b(RM -R)
+

4%.
=
1.25(8%-(1)
=

9%
=

R1 = 10%
=

WACC RxWs (1-tan) R,

=
+
x
W, +
R1x WI
8.89%x3. 19%(1-21%) +
=
9%. x 50.4%. + 17.6%
10%x

6.5%
=
 900:
Beginning payable of Q1 this year:
-x purchases a lastyear
-

75%x1,925
6
=
x

: 962.5

I
Q Q2 Q3 Q4
Beginning payable 962.3
↑250 1,060 925

purchases 1,845 1,598 1,387.5 1,462.5

payment of AR 1,577.5 17601,322.5 1,412.5

Ending of Al 1,060 925 975

1,230
Purchases of Q2 75%,
=

x 2460; pint of A1 Q1 1,845

=

1
x 969.5 1,577.5
+
=

Ending of A1Qn=962.5 1,845 1,577.5:1236

+
-

&1 Q2 Q3 Q4
Antofaccount1,577.5 1,760 1,527.5 1,412.5

wages, takes and385 370

...
492424

hang-term.... 118 110 10 118

Total 9079.52,3629,056.31,892.5
 correct discountrate:
discount rate (1 -tan ) 81.x (1-35i)
=

5.2%=

depreciation tan shield 5,000,000,

=
35% $507,500
=

Lease 0 A 2 34
After tan lease port
CCeasex (1-taul
-

1,098,500
-

1,098,500 -

1,098,500 -
1,098,500
-

total cash flow (leasing -

1,098,500 -

1,098,500
-

1,098,500 -

1,098,300
-

Buy
cost of machine -
5,800,000

depreciation tan shield 507,500 SO7,300 307,300 507,300

total cash flow (buying) -

3,800,000 307,300 307,500 507,500 507,500

Cash flow (base buy)

-
5,500,000
-

1,606,000 -1,606,000
-

1,600,000 -

1,606,000

Presentvalue when leasing 3,800,000 1,600,000+

()-=191,561.2538
=
-

Men
=> base
 discountrate:discontrate (1-tan)
correct
=94.x (1-35%) 5.85% =

Atertain of lease putlease h-tan)

+

= 130,000x (1 -

55%) $84,500
=

depreciation 450,000
=
35%
x $93,600
=

tan shield S

al Lease O I 2 3 &
Aftertan lease print -

84,500 -

8,500
-

84,500 -

84,500

total cash flow (leasing) -

8,500-84,500-84,500 -

84,500

Buy
cost of machine -

480,000

depreciation tan chield 33,60033,60033,66033,600

total cashflow (buying) 480,000
-

$3,600.33,60033,60033,600

Cash flow (lease -buy) 480,000 18,100 118,100 118,100 118,100

-
- = =

Present value when leaving 480,000 118,100,1 (1 5.851)-3.- 19,516.78

- +

5.85%

Buy
=
 a/MVD=50,000 106.5%x 1,000 x

$55,250,000
=

MY, 200,000 17.5%. 1,000

= x x

-$35,000,000
My 125,000 x79 $9,875,000
=
=

MV, 2,300,000= 65:$149,500,000

x

MVr= $247,625,000
a) Rg Pr B Rp 4%. 1.2x7%
= +
+
=
+

=
12.4%

2,x(1 4a) -4] R

b/1 1 costof debt tak
after
-

(coupon rate)
-

=(1 35%) 5.2%

-
+

(1-(1 -30] Ye
186.541,000 = 3.7%. 1,000
x
x R1)
+

+
= 5.38%
RDe
Ryn 5.2%
=>
=

after tan (zero compon)

ex/r x ] -
debt
t =
-

R)
+

cost
of
=(1-35%) 6% x 3.9%
=

=) 17.5%. 1,000 1,000

x - R 6%
=
=

( Rx)s0 +

W
35350,000 21. e Wp 985,888 =
=

=
-

WD 35,000,000
=
14.1"
=

Wi 149,500,000
=

68.4%
=

247,625,000 247,625,000

/Re::5.0b1
WACC:Ry,"Y,(1-tan) R. W. (1-tan) RexWa+ -
+

Rex We
= 3.9%. x21.5%(1-35%) 6%. +
14.11. (1-35%) 12.4%.x60.4%. 5.061.x41-
x
-
+

9%
=
 a) all-equity plan (unteverred plan)

ElSu EBIT
=

779,000
=

stock 315,000
share
of
2.4%
=

leverred plan
E1S2:EBIE(debt debfrate) 749,000 -(,140,000 10%) 1.49%
-
=
x
=

share of stock 225,000

Su higher
=>

b/ all-equity plan (unleverned plan)

A1Sn 1,748,000
= 5.5%
=

315,000

levered plan

E191 =
1,748,000 -(4,140,000 10%)
x
3.9%
=

225,000

E1S,
=>
higher
/Break-even level
EBII =
EBIT -(4,140,000 10%)
x

=) EBIT $1,449,000
=

315,000 225,000
a) Boom 0.12 +20%
=
+

0.95 x40% 023 25%. +

+ 0.5 15%. 29.65%
+ x =

Good 0.09 +20%

=
+

0.12 40%. +0.19 x25% 0.05 x 15%

x
+

10.6%
=

for 0.02 20%

=

- (-0.11 40%) (- 0.03 25%) (0.2 11.)

+
x
+
x +

x =
-

7.75%

Bust (-009) 20%

=

x (-0.19
+

(6%) (-0.08)
x
+

25%,
x
+ (-0.3) x N5]. = -
15.91

E(R)1 29.65%,0.3 10.61.x0.35 (-7.75%) x0.25 + (- 15.9%) 0.1 9.08%

+

x
+
=

b/ T:war1 -

9.08%)" 0.251-7.75% -9.08%)

2
=0.3x (29.65% -

9.08%) 0.35(10.6%
+ -
+

+0.1(-15.9%-9.88%)"

== ?;6:
* What is the risk-free rate?
-Rate of return an investmentwith risk
of zero

What
* is the risk premiumn?
interest rate and another with sonder
-
Difference btw the paid by one
country finance
What
*
are component of
bands?
-maturity, face value, coupon yield
Whatfactors will influence the price of
* a band?
-
yield, interest rate, band's rating
*

Difference btw
real interest rate us nominal interest rate

*
Relationship btw nominal rate, real rate I inflation

Whatis
*
systematic risk & unsystematic risk

What is
*
efficientfrontier

rishthe setofoptimalportfoliothatafter retent highest expected return for a

defined level
of