Kellogg Finance Prof Banerjee
Problem Set #1
1. Suppose that you borrow $25,000 on September 1, 2007 and another $25,000 on September
1, 2008 to finance the portion of tuition and living expenses for graduate school for which
your savings are insufficient

Exhibit 4
Exhibit 4
UST Inc. - Pro Forma 1993 Results for Alternative Capital Structures
($ in millions except per share data)
Net Sales
EBIT
Interest
Profits before taxes
Taxes
Profits after taxes
Cashflow
Total dividends
Shares outstanding
Earnings / sh

Problem 1. Short answer questions. Quantify your answers when appropriate. Rephrasing the question
will give you no points.
f
B a. (5 points) Explain why, despite the negative effects that secondary equity issuances generally have on
stock market valuatio

g.- b. (5 points) Calculate the after-tax weighted average cost of capital of the rms MO (without the
project).
' rmlr sl<.0(oq)("3§>
"SJJJZKZ
/b/ ,- l
"a c. (5 points) Can you 56 the WACC that you calculateti i part (b) to value the ergonomic chair p

d) (8 points) The marketing department has changed its mind. They now believe that the new clothing line
will continue to sell indenitely after year 5. Starting in year 6, the project will operate exactly as it did in
year 5, except that there will be no

Problem Set 4
Part I
1.
Portfolio
EW Optimal portfolio
VW Optimal portfolio
Equal-weighted portfolio
Value-weighted portfolio
Mean
0.916%
0.909%
0.929%
0.749%
Standard Deviation
4.572%
4.665%
5.049%
4.271%
We found that the optimal portfolios did not sign

Problem Set 3
Question 1
a) No, the company should not buy access to the database, because the cash flows over the
next few years generate a negative NPV.
b) No - while this generates more positive cash flow, it still results in a negative NPV.
Question 2

Exhibit 4
Tax Rate
0.38
Payout Ratio
0.56
1993 Pro-Forma
Scenario I
Scenario II
Scenario III
UST Inc. - Pro Forma 1993 Results for Alternative Capital Structures
($ in millions except per share data)
Net Sales
EBIT
Interest
Profits before taxes
Taxes
Prof

FE 310 PS5
Silva Tang, Max Smith, Joe Cai, Leo Xie
11-12-2013
UST Case
The assumptions we use in this analysis are the following:
USTs debt in all three scenarios is perpetuity
UST maintains its current level of dividend payout ratio, which is 200/357.1

Exhibit 4
UST Inc. - Pro Forma 1993 Results for Alternative Capital Structures
($ in millions except per share data)
Net Sales
EBIT
Interest
Profits before taxes
Taxes
Profits after taxes
Cashflow
Total dividends
Shares outstanding
Earnings / share (EPS)

f) Suppose you are allowed to depreciate the equipment over 2 years instead of 4 years. Also,
suppose the NPV of the project is $9,764.91 when the equipment is depreciated over 4 years. If
you choose to depreciate the equipment over 2 years instead of 4 y

Annuity PV(r,T,C1)
PMT(r,n,loan amount)
IPMT(r, which payment, n, loan amount)
PPMT(r, which payment, n, loan amount)
NPV(rate, value 1, value2,)
RATE(# of coupons, coupon payment, -bond price, F)
SLOPE(data range 1, data range 2)
Periodic payment amount

Capital Structure in Imperfect Markets 2: Valuation
Techniques for Investment and Financing Decisions
Prof. Banerjee
Kellogg, Northwestern University
Prof. Banerjee (Kellogg)
Capital Structure 2
(c) Finance Dept., Kellogg
1 / 31
Financing and Project Sele

Payout and Capital Structure in Perfect Markets
Prof. Banerjee
Kellogg, Northwestern University
Prof. Banerjee (Kellogg)
Perfect Markets
(c) Finance Dept., Kellogg
1 / 33
Payout and Financing in a Perfect World
Understand the channels for remitting earnin

Capital Structure in Imperfect Markets 1: Taxes and
Financial Distress
Prof. Banerjee
Kellogg, Northwestern University
Prof. Banerjee (Kellogg)
Capital Structure 1
(c) Finance Dept., Kellogg
1 / 34
The eects of taxes and distress costs
Understand the role

Payout and Raising Capital in Imperfect Markets
Prof. Banerjee
Kellogg, Northwestern University
Prof. Banerjee (Kellogg)
Payout and Raising Capital
(c) Finance Dept., Kellogg
1 / 55
Payout and Issuance
How do market imperfections such as taxes, informatio

Fall 2013
FE 310 Principles of Finance
FINAL EXAM
READ THESE INSTRUCTIONS CAREFULLY BEFORE BEGINNING THE EXAM.
Make sure you have 11 pages.
BE NEAT AND SHOW YOUR WORK. Numerical answers without explanation will receive no credit,
but incorrect answers wit

Derivatives
Prof. Banerjee
Kellogg, Northwestern University
Text
Prof. Banerjee (Kellogg)
Derivatives
(c) Finance Dept., Kellogg
1 / 36
Derivative Securities
Understand the payos of derivative securities and the relationship
between the payos of derivativ

Fall 2012
FE 310 Principles of Finance
FINAL EXAM
READ THESE INSTRUCTIONS CAREFULLY BEFORE BEGINNING THE EXAM.
Make sure you have 10 pages.
BE NEAT AND SHOW YOUR WORK. Numerical answers without explanation will receive no
credit, but incorrect answers wit

Kellogg Finance Prof Banerjee
Problem Set #6
Setting: A small video chain is deciding whether to engage in a new line of delivery business and
is conducting an economic analysis of the valuation impact of this decision.
This case requires you to value the

Kellogg Finance Prof Banerjee
Problem Set #2
The purpose of this case is to estimate the relevant financial data necessary to generate cash flow
projections and calculate the Net Present Value (NPV) of an investment opportunity.
This case requires you to

Security Valuation and Capital Budgeting
Prof. Banerjee
Kellogg, Northwestern University
Prof. Banerjee (Kellogg)
Security Valuation and Capital Budgeting
(c) Finance Kellogg
1 / 34
Present Values for Valuation and Budgeting
Apply present and future value