Fin 400 Final Exam Review

1. Why does Daniel Gilbert, author of Stumbling on Happiness, say that experiences might bring more satisfaction than durable goods? Do you agree or disagree?

However, additional analysis should be done to differentiate value distribution of $328.9m in the case of levering up $1,000m between cash-out

The fixed cost is assumed that Larry has discovered the other fixed cost incurred. The total investment is $800,000. The worst case scenario assumes that Larry got a total line of credit from the bank in the amount of $400,000 and invested $400,000 from other source. The Notes payable – short term and the long-term debt is (11.8 + 3.7) = 15.5 % from Table F in the handout. The Loan interest and payment per year is ($400,000 * 0.155)= $62,000. The Income data from Table F indicates that there is a 0.4% of all other expenses net out of the total sales which equals to $109,908 (5,700,666 gallons * $4.82 *0.4%) .

What risk-free rate and the risk premium did you use to calculate the cost of equity?

Your written answers to the questions below are to be available to be sighted by your lecturer (not submitted to the School Office) at the start of the tutorial session. To be recorded as attending the tutorial requires that the lecturer deems that the worksheet has been satisfactorily attempted.

11. What is the Cost of Equity? ke = Risk Free Rate + (Beta X Risk Premium of 7.5% points). .03 + (.99 x .075) = 10.43%.

1. This is a closed book exam. You may only have pens, pencils and a calculator at

Refer as needed to material in Chapters 12 and 13. Read the instructions carefully and answer all questions clearly and concisely. Include examples to highlight your comments.

Review the sample syllabus and sample rubric under the questions below. Then, provide answers underneath the following questions:

22. Suppose that Hanna Nails, Inc capital structure features 45 percent equity, 55 percent debt, and that it’s before tax cost of debt is 5%, while its cost of equity is 9 percent. If the appropriate weighted average tax rate is 40 percent, What will be Hanna Nails’ WACC?

When new equity is to be raised, then there will be floatation cost. The net price will be $25-$2 the floatation cost = $23.

a. What risk-free rate and risk premium did you use to calculate the cost of equity?

OCC and OCP together invested $750,000 into Dogloo in the form of subordinated debenture with 13% interest rate, which guarantees them stable interest cash inflows each year (Exhibit 4). The two investors’ combined ownership interest will be 0.5% of the Dogloo’s equity value because the company’s equity valuation is $213 million, exceeding $80 million; this will be the cash inflow at exit for the investors. Through calculation, the required equity value at exit is $238 million if the investors have an estimated IRR of 25% (Exhibit 4).

This assignment has a maximum total of 100 marks and is worth 10% of your total grade for this course. You should complete it after completing your course work for Units 1 through 5. Answer each question clearly and concisely.

The company’s objective is to improve its competitive position in deep-discount brokerage. In order to achieve this objective, the company must grow its customer base, requiring an investment of $100 million to upgrade its technological capabilities as well as an increase of $155 million for its advertisement budget. In order to evaluate the company’s cost of capital, we used the Cost Asset Pricing Model. Since the company went public recently, it would not be an accurate assessment of the risk of