1. Talika Hanover Tech is currently an all equity firm that has 400,000 shares of stock outstanding with a market price of $20 a share. The current cost of equity is 16 percent and the tax rate is 40 percent. The firm is considering adding $1.4million of debt with a coupon rate of 8 percent to its capital structure. The debt will be sold at par value. What is the levered value of the equity?

2. Hala's Company stock price volatility is 30%. The firm is planning to issue a call option written on its stock with maturity of 2 years and a strike price of $50. The current stock price is $56 and the risk free rate is 6%. C = S*N(d1)-PV(E)*N(d2) d1= ln(S/E)+(R+Variance/2)*T / SD *SQRT(t) d2 = d1 -SD *SQRT(t) A. Calculate d1. B. What is the options Delta (d1)?

3. XYZ is planning to acquire ABC firm. The resulting synergy is expected to be 150. In a friendly negotiation, ABC shareholders asked for $50 premium. The value of both firms before merger is as follows: XYZ ABS MV 800 500 # of shares 100 50 Price 8 10 A. Compute the Value of XYZ after the question if the acquisition is cash acquisition.

B. Compute the NPV for XYZ if the acquisition is cash acquisition. C. What is the Total Shares after merger if the acquisition is stock acquisition.

4. the capital structure by issuing $100,000 of debt at 7 percent interest. The debt will be used to repurchase shares of stock. You own 100 shares of Haithams stock. You also loan out funds at 7 percent interest. Assume you loan out all of the funds you receive from the sale of stock. Ignore taxes. A. How many shares of Haitham's stock must you sell to offset the leverage that Haitham is assuming?