a b c d e

1 benefit = 90M cost = 80M

2 $5,704
3 6300
4
5 25
6 47.5
7 $10,000 no
8 no
9 540
10 $1,000
11 $58 54.72
12
13 961.54
14 208 192.31
15 82.03
16 82.03
17 ii>iii>i iii>ii>i i>ii>iii
18 2215.6 134327.02
19 4407.98 6476.77 6301.02
20 8954.58 4765.37 1783.72
21 7942.28
22 1563.13
23 141858.77
24 530000 85597.96 245492.55
25 1272828.92 647041.68
26 32577.89 198119.42 8310.41
f
Question Subdivision-a Subdivision-b Subdivision-c Subdivision-d Subdivision-e
1 106.53 120.92
2 28.49
3 $10,000.12
4 $5,023.75
5
6
7 $1,440.00
8 $55,390.00 $61,412.00 2: $208, Year 3:
9 $257.71 $324.64 $324.64
10 $2723, $3152.71
11 $2,041,397.00 $862,308.00
$83,333.33
12 $83333.33, PV:
13 $49324.87
14 £12,500.00 £13,500.00
15 $14,269.25
16 $23,414.30
17 $4,272.33 $50,049.81 -$5,340.42
18 $17,325.53 $4,716.98
19 $89,516.50
20 $19,250.92
21 PV: $165.77 million
22 $2,962,003.46 $49,169.99 $347,915.81 45.84 $1,000,000.00
23 $25,000.00 $27,000.00
24 $18,181.82
25 $3,214,285.71 $7,500,000.00 ###
26 21.86
27 79.82
28 7.20%
29 17.46% $31,058.48
30 33.33%
31 $40.00
32 $240,727.76
33 $7,505.34
34 $63,848.02
35 $13,232.50
36 7.27
37 10%
38 NPV: $3,995,074
39 $5,225.55
40 $6,744.25
41 $1,000,000.00
42 $9,634.67
43 $56,481.07
Question Subdivision - a Subdivision - b Subdivision - c Subdivision - d
1 4.66% 9.54% 0.76%
2 0.50% 6.17%
3 r=0.1664
4 2.50% 5% 0.50%
5 26817.06
6 9.42%
7 4.939%,4.889%
8 8583.38
9 36.8568
10 73254.8
11 2%
12 632
13 957.66
14 I=280;P=175.08
15000;NET=163.76
16 354900
17 543069
18 2759.52 1020.82
19 531.33
20 33.96
21 143.14
22 FP=763.67;LRP=30MNTHS
23 NPER=-623.72
24 596
25 987.93 1053.83 -169.89 205259.23
26 31250
27 5071.33 405411.15
28 272209.09 1623.06
29 7.33%
30 10.16%
31
32
33 3.88%
34
35
36
37
Question Subdivision - a Subdivision - b Subdivision - c Subdivision - d
1 27.5
2 20 yrs 6% 1000
3 32071354.72
4 5.50% Upward Sloping
5 84.95
6 70.97
7 9.05
8 972.5 1040.75 1150 1000
9 3 year 4% coupon bond6% CB
10 989.06
11 1040.05
12 7.50% 934.97
13 6.65%
14 1000.02
15 Discount At par Premium Premium
16
17 Premium 1039.56
18 1073.6
19 1138.02
20 1068.02
21 5%
22 105.08 5%
23
24
25 IRR=YTM IRR< INITIAL Y IRR> INITIAL YTM
26 96.061 0.30% 1.40% Credit spread increases as bond rating falls
27 1163.47 1131.24
28 114.58
29 1008.36 9918 6.50% 7.50%
30 890.33 799.79 1.70%
es as bond rating falls
 1 $5,471.70
2 -$8,609.69
3 -$4,521.74
4 85600
5 $ 9.11 million today
6 -13095.48 1701.35
7 $47,439.92
8 $ 4.87 milion
9 16.16%
10 -$9.895 -$503,381
11 $169,482 Reject 14 % -$64.816 change
12 IRR 12.72 % 12% 0.72%
13 7 months
14 36.37%
15 IRR 60.74 %
16 2 IRRs so does not work
17 Accept
18 if r=6% => NPV=Atleast twice Atleast 2 IRRs
19 Undertaken
20 2 IRRs 10.37% Taken
21 - $ 6.7 million
22 < $ 561290
23 No IRR
24 236154 Proceed
25 -$628,322
26 21% 47.88%
27 Take A take B Take A
28 NPV a=9.06, NPIRR a=14.7%, I 5.567 % Invest in B
29 NPV o= -48.2, NPV l= -41
30 Choose A
31 -34.23
32 -8.032
33 $874.79
34 NPV a = 2, NPV Invest in B and C
35 PI p = 0.16, PI r = 0.15, PI l =0.06, PI o = 0.53
36 Select 5,3,2 Project 5
5.66 years
 A B C D E
1 5.5
2 $9,166,666.67
3 $38
4 $25.20
5 681.37 $9.53
6 19.41 20.45 0.054
7 8.11 P(0)=5.13 P(0)=12.07 P(0)=9
8 46.81 to 51.53 45.18 to 55.50 36.44 to 55.75
9 39
10 84.79
11 46.25
12 7.5
13 50
14 0.97%
15 34 to 37.4
16 75.2 28.8 to 177.81 30.45 11.11 to 51.54
17 33.91 18.61 to 51.47 37.72 25.63 to 68.31
18 165.2M 102.2M
19 11.25 18.75
20 124 5.12%
21 5.89
22 70 to 18
23 9.75%
24 212798.73
F G H
Question Subdivision - a Subdivision - b Subdivision - c Subdivision - d
1 TP= 11000;MF=10000;WTP=52.38%;WMF=47.62%
2 19.80%
3 232500 16.25% GF=51.61%,M=16.13%,V=32.26%
4 0.2234
5 0.2234
6 If price of one stock goes up, other stock price also goes up and vice versa
7 a. Ra=0.07,Rb=0a. Ra=0.0738,R E=0.0562, Var=0.00352, SD=0.0593
8 Ra=3.4%, Volatility=10.6%, Rb=12%, Volatility=15.65%
9 10.51%
10 Coca-cola=8.24%, GasCo=4.25%
11 5.90%
12
13 0.367
14 R=8.5%,SD=14.1%
15 Volatility of portfolio is less if correlation is less than 1
16
17 SD for A=25.48%, SD for B=26.59%. Hence choose A
18 Choose stock that has lower correlation with A
19 7.61% 18.26% 1.83% 3.81% 68.49%
20 TS=0.942% JNJ=1.992% MAG=93.44% PDJB=3.622% Total value=1380.5Billion
21 No change
22 Apple=-2.8%, PNG=-1%
23 0.64
24
25 14.80%
26
27 1.31
28 Beta=1.572, return=13.432
29 I=23%, B=17%, Beta=1.62, Return=21.2%
30 Beta=1.6, return=19.9
31 22.20%
32 16.40%
33 ER=10.2%, RR=6.67%
34 Beta=1.4, doing so requires 2/3rd money into Bay and 1/3rd into city
 Total value=1.314Billion
value=1380.5Billion
 1 debt - 23.81%, preffered stock - 4.76 %, Common equity - 71.43 %
2 debt - 30.77 %, Common equity - 69.23 %
3 $ 50 million $ 42 million equity - 54.35 %, debt - 45.65 %
4 ROE - 10 %, ROP - 8 %
5 5.54 %
6 4.80%
7 6.25%
8 21.20%
9 33.80%
10 8%
11 10.25%
12 5.944 %
13 13.60%
14 0.07243
15 10.53%
16 9% 7.143 % 6.50% $ 148 million 8.003 %
17 $214.29
18 -1.359
19 15%
20 $36.36 million
21 8.25%
22 4.40%
23 10.48% 13.01%
24 29.36
25 14.4 million
Question Subdivision - a Subdivision - b Subdivision - c Subdivision - d
1 2 million Shares;
$1.25 $7.25 million 86.20%
2 $0.5 per share $5 million Offer 2:
3 $33 million $42 million 0.043 0.000000024
4 $26 B:
Series million
1/7; $28 million
5 Series C&D: 1/14
6 71.40%
7 $13.40
8 $30.36 million
9 $15 per share 5%
10 13.30% $20 million
11 35.70%
12 $9.8 million
13 $5.18 million
14 $16.89
15 50%
16No Money, 41.67%
17 988,000 Shares
18 $201.875 million $323 million $195,842,000
19 2,105,263 2,148,22817.39%; 17.68%
20 $40 million
 A B
1 29167 129167
2 $4M 33% of equity must be sold to raise $1M
3 $40M D=19.048 E=20.952
4 A)0 B)800 C)0 D -80100
5 15% 18%
6 rE=9.37%
7 $120M $245M
8 $20.10M FCF is not affected by interest expenses
9 1)1.12 2)0.896 3)0.672 4)0.448 5)0.224
10 $13.65B
11 $12,000 $10,000
12 $8.30M
13 $0.21M $3.5M
14 0.1033 0.0952
15 8.75% 8.31%
16 1.10%
17 $33.33M $40M
18 0.13425
19 $150M $220M
20 a) $75M b)$15/share
21 $19/share
22 $16/share
23 $2.5/share $2.85/share
24 86.5M
25 6.1 3.5M
26 100 107.75M
27 450M 187.5M
28
29 E=0 D=9.09M 2.73M
30 Project A Project B
31 40% of E D=15M
32 0.585
33 i)issue Equity ii) 12.5
 C D
29167
a)$2m b)$2m
Without Leverage r=10% with leverage r=14.5 without leverage r= (-50%) with leverage r=(-100%)
-80150
Returns are high because of high risk

$50M lower than part (b) $50M

est expenses

$4,000 40%

$3.5M

a)$8.50 b)5.882M shares $8.50/share

2.775 2.85

no

D=13.64M E=18.18M
Project C 9M

0.415per $1 of interest
14.5 all firms will issue debt
ge r=(-100%)
 1 April 1 March 31
2 $ 49 per share
3 $ 18 million $20
4 $ 20 million drop 71.40%
5 $ 2 million
6 $ 50 per share 2 million share $ 50 per share
7 $14.50 $15 Same
8 Same position
9 $13.33 $16.67
10 $8.50 $2
11 Yes No Yes Yes No
12 Invest $ 5 Borrow $ 5 today
13 Same Fall by $ 100 milNo effect
14 Rise by $ 35 millFall by $ 100 milBenefit investor
15 Same Fall by $ 85 milli No effect
16 $ 50 per share
17 $ 25 per share
18 $ 70 / 30 per share
19 Before, After
20 Increase
21 $35 $35,000
22 $16.67 $13.33
23 2400
24 $8.21
 1 97 days
2 53 days
3 182.5 days
4 -$2,396,654
5 384058
6 $4,530 41.4 days 26.3 days
7 15.88%
8 34.75 %
9 $38,856
10 $ 128000, $ 80000
11 32.59 days
12 should investigate
13 20.1 %
14 55.90% 37.4 %
15 45.6 days
16 76.65 days
17 91.25 days $400,000
Question Subdivision - a Subdivision - b Subdivision - c
1 Month 2 Every month
2 Increases
$200,000ininQ1,Q2, and Q4;inDecreases
Q2, $600,000 Q3, $250,000in Q3
in $3,000
3 Q4
4 $1 million, excess cash in Q1,Q2 and Q4
5 $600,000 in Q3
6 $500,000 in Q3
7 Excess cash needed is $300,000
8 Alternative
Effective annual rate isnt increasedB;by28.2%
a full
9 percentage
10 6.20% 6.70% 7.10%
11 17%
12 6.20%
13 5.50%
14 Treadwater: $5,608; Magna:$12,541
15 6.70%
16 10.70%
17 11.10%
18
Income Statement ($000) 2014Q4 2015Q1
1 Sales 4545 5000
2 COGS -2955 -3250
3 SGA -455 -1000
4 EBITDA 1136 750
5 Depreciation -455 -500
6 EBIT 682 250
7 Taxes -239 -88
8 Net Income 443 163
Statement of Cash Flows ($000)
9 Net Income 163
10 Depreciation 500
11 Changes in WC
12 Accounts Receivable -136
13 Inventory 0
14 Accounts Payable 48
15 Cash from Operating Activities 574
16 CAPEX -1500
17 Other Investments 0
18 Cash from Investing Activities -1500
19 Net Borrowing 0
20 Dividends 0
21 Capital Contributions 0
22 Cash from Financing Activities 0
23 Change in Cash and Equivalents -926
Cash Balance and Short-Term Financing ($000)
24 Starting Cash Balance 1000
25 Change in Cash and Equivalents -926
26 Minimum Cash Balance 500
27 Surplus (Deficit) Relative to Minimum -426
28 Increase (Decrease) in Short-Term Financing 426
29 Existing Short-Term Financing 0
30 Total Short-Term Financing 426
31 Ending Cash Balance 1000 500
division - c

2015Q2 2015Q3 2015Q4

6000 6000 6000
-3900 -3900 -3900
-600 -600 -600
1500 1500 1500
-525 -525 -525
975 975 975
-341 -341 -341
634 634 634

634 634 634

525 525 525

-300 0 0
0 0 0
105 0 0
964 1159 1159
-525 -525 -525
0 0 0
-525 -525 -525
0 0 0
0 0 0
 0 0 0
0 0 0
439 634 634

500 502 1136

439 634 634
500 500 501
439 636 1269
-437 0 0
437 0 0
0 0 0
502 1136 1770