{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# FI516_WEEK_2_HOMEWORK_ANSWER_KEY - FI-516 WEEK 2 HOMEWORK...

This preview shows pages 1–2. Sign up to view the full content.

FI-516 – WEEK 2 HOMEWORK ANSWER KEY Problem 15–9 15-9 a. Present situation (50% debt): WACC = w d r d (1-T) + w ce r s = (0.5)(10%)(1-0.15) + (0.5)(14%) = 11.25%. V = = \$100 million. 70 percent debt: WACC = w d r d (1-T) + w ce r s = (0.7)(12%)(1-0.15) + (0.3)(16%) = 11.94%. V = = \$94.255 million. 30 percent debt: WACC = w d r d (1-T) + w ce r s = (0.3)(8%)(1-0.15) + (0.7)(13%) = 11.14%. V = = \$101.023 million. Problem 15–10 15-10 a. BEA’s unlevered beta is b U =b/(1+ (1-T)(D/S))=1.0/(1+(1-0.40)(20/80)) = 0.870. b. b = b U (1 + (1-T)(D/S)). At 40 percent debt: b L = 0.87 (1 + 0.6(40%/60%)) = 1.218. r S = 6 + 1.218(4) = 10.872% c. WACC = w d r d (1-T) + w ce r s = (0.4)(9%)(1-0.4) + (0.6)(10.872%) = 8.683%.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
V = = \$103.188 million. Problem 26–8 26-8 a. V U = \$500,000/(r sU – g) = \$500,000/(0.13 - 0.09) = 12,500,000.
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 2

FI516_WEEK_2_HOMEWORK_ANSWER_KEY - FI-516 WEEK 2 HOMEWORK...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online