MGFC10final_Sum2013_Solution.pdf - Answer 1 a RHR 0.08 0.10 0.12 0.14 Pr RHR Pr 0.10 0.45 0.25 0.20 0.008 0.045 0.030 0.028 0.111 E(RHR = 0.111 2 RHR Pr

MGFC10final_Sum2013_Solution.pdf - Answer 1 a RHR 0.08 0.10...

This preview shows page 1 - 3 out of 6 pages.

Answer 1: a. HR R Pr Pr HR R 2 Pr HR R 0.08 0.10 0.008 0.00064 0.10 0.45 0.045 0.0045 0.12 0.25 0.030 0.0036 5 0.14 0.20 0.028 0.00392 0.111 0.01266 E(R HR ) = 0.111 2 2 2 2 ( ) ( ) 0.01266 0.111 0.000339 HR HR HR E R E R 0.000339 0.018412 A b. M R Pr Pr M R Pr 2 M R 0.06 0.30 0.0180 0.00108 0.07 0.35 0.0245 0.001715 5 0.08 0.35 0.0280 0.00224 0.0705 0.005035 E(R M ) = 0.0705 2 2 2 2 ( ) ( ) 0.005035 0.0705 0.00006475 M M M E R E R 008047 . 0 00006475 . 0 M c. , HR M = (0.08-0.111)(0.06-0.0705)0.1 + (0.10-0.111)(0.06-0.0705)0.2 + (0.10-0.111)(0.07-0.0705)0.25 + (0.12-0.111)(0.07-0.0705)0.1 +(0.12-0.111)(0.08-0.0705)0.15 + (0.14-0.111)(0.08-0.0705)0.20 = 0.00003255+0.00002310+0.000001375-0.00000045+0.000012825+0.0000551 = 0.0001245 5 , , 0.0001245 0.8403 0.018412 0.008047 HR M HR M HR M d. , 2 0.0001245 1.9228 0.00006475 HR M HR M 2 e. ( ) ( ( ) ) HR f HR M f E R R E R R 0.111 1.9228(0.0705 ) f f R R f R 0.026612 2 f. 1 0.30 (1 ) 1.30 1.30 WACC S B c WACC S B B r r r T r V V V = 1 2 1 2 0.3 0.111 0.06(1 0.4) 3 3 1.3 3 1.3 WACC r 6 0.037 0.018462 0.153846 WACC WACC r r 0.065546 WACC r 1,000,000(1 0.4) 10,000,000 $6,879,536 0.065546 0.03 NPV  
Image of page 1
Answer 2: a. Sales $2,500,000 Variable Cost -1,000,000 Depreciation -800,000 Taxable Income 700,000 Taxes @ 40% 280,000 After tax income 420,000 Depreciation 800,000 Investment -800,000 UCF 420,000 10 ) )( 1 ( 0 0 B c S r r T S B r r 0 0 0.15 0.40(1 0.4)( 0.0.09) r r
Image of page 2
Image of page 3

You've reached the end of your free preview.

Want to read all 6 pages?

  • Fall '16
  • SyedAhmed
  • tax lease payment, a. RHR

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors