BOSC 2 FINAL solutions.xlsx - Points Exercise 1 Exercise 2...

Points Grade
Exercise 1 12 12
Exercise 2 9 9
Exercise 3 23 23
Total 44 44 6.0
Points
obtained

Financial analysis - 12 points
Question 1
(9 pts)
You have been given the following information about a company. Please answer the various questions about the company below.
Rates
Tax rate 30%
Interest rate on debt 3% Your Interest Rate is Your Rate of Debt
Risk free rate 2%
Beta 1.25
Market risk premium 6%
Accounting information (in $)
LT Debt 200
Number Form
Equity 250
Total assets 510
Net income 30
EBIT 51
Dividends paid this year (in total) 23
Market information
Number of shares outstanding 100
Share price at beginning of 2014 2.5
Share price at end of 2014 2.6
INTEREST RATE AKA. KD
Calculations required: Answer
What is the NET cost of debt?
What is the company's cost of equity (Ke)? 9.50%
What is the WACC (weighted average cost of capital)?
What is the Return on capital Employed (ROCE)? 7.93%
What is the economic value added (EVA)?
250.00
What is the market value of the company's equity at the end of 2014? 260.00
What is the return on equity (ROE)? 12.0%
13.20% PUT ON CHEAT SHEET
Question 2
(3 pts)
Situation Invest, do not invest, irrelevant?
You are interested in the equity -> shares, you want the return to be high (want your investment to pay off)