MGFC10mt_Fall2014_Solution_Assg1_Fall2015.pdf - ANSWER 1 a S = $100 2,000,000 = $200,000,000 rS = rf S rM rf = 3 1.5(8 3 = 10.5 B = $1000 111.47 100,000

MGFC10mt_Fall2014_Solution_Assg1_Fall2015.pdf - ANSWER 1 a...

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ANSWER 1: a.S = $100 * 2,000,000 = $200,000,000 ()3%1.5(83)10.5%SfSMfrrrrβ=+=+=3B = $1000 * 111.47% * 100,000 = $111,470,000 () /70(10001114.70) / 200.060765() / 2(10001114.70) / 2BCFPtrYTMFP++===++Try rB= 6% 5 ()()2020111.0610001114.7070$1114.700.061.06=+=P = $70(1,000,000) = $70,000,000 23.50.055%70Pr==V = S + B + P =$200,000,000 + 111,470,000 + 70,000,000 = $381,470,000 2S/V = 200,000/381,470,000 = 0.524288 B/V = 111,470,000/381,470,000 = 0.292212 P/V = 70,000,000/381,470,000 = 0.1835 ()=++=PCBSWACCrVPTrVBrVSr10.524288(0.105) + 0.292212(0.06)(1-0.4) + 0.1835(0.05) = 0.07475 32510,000,00015,000,00050,000,00010,000,000(1.07475)NPV=+()()25111.074758030 300,0005,000,000 (10.4)0.07475+()()2525111.0747550,000,00015,000,000(0.4)250.074751.07475++= -$75,000,000+1,649,353+67,028,603+8,937,147+2,474,030 = $5,089,133 10
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OR 2510,000,00015,000,00050,000,00010,000,000(1.07475)NPV=+()()25111.074758030 300,0005,000,000 (10.4)0.07475+()()2525111.0350,000,00015,000,000(0.4)250.031.07475++= -$75,000,000+1,649,353+67,028,603+13,930,518+2,474,030 = $10,082,504 10
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ANSWER 2: a.Her cash flow = 15,000,0000.15100,000$15,000100,000,000= ×=3She is expecting 15% rate of return b.Sell shares of Asher Limited; nets $100,000 7Lend $40,000 @ 7% and invest $60,000 in JunYung shares Her total cash flow now would be Interest income = 7%(40,000) = $2800
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  • Fall '16
  • SyedAhmed
  • rs, d. rWACC Asher, 000, 000

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