1) The first question has 4 parts and asks about the Forman Companys balance sheet, along with some supplementary information, and the companys weighted average cost of capital (WACC).

a) What is the firm's net working capital? b) What is the firm's total equity capitalization? c) What is the total value of the company? d) What is the firm's WACC (weighted average cost of capital)?

2) During our session, we talked about the value of a levered company compared to the value of an unlevered company assuming the company faced a tax rate on its profits. Given the data below, calculate the following: -a)The value of the levered company

- b)The equity cost of capital of the levered company

Data and Description: There is a unlevered company (all equity funded - no debt) worth $80 million which has an overall cost of capital of 10%. If there was a second company which had the same asset structure (left-hand side of the balance sheet) and operated in the exactly the same fashion but was funded (right-hand side of the balance sheet) with 50% debt financing (with an 8% interest rate) and 50% equity financing, what would the value of the second company be? And what would the equity cost of capital be? (Assume the tax rate is 40%)

	Balance Sheet -- Forman Corporation
Cash/Marketable Sec.	2,500,000		Accounts Payable	8,500,000
Accounts Receivable	8,400,000		Taxes Payable	2,840,000
Inventory	11,340,000		Other Accruals	6,000,000
Property	250,000,000		Bond 1 (6 1/2%)	200,000,000
Equipment	1,100,000,000		Bond 2 (7%)	260,000,000
Acc. Dep.	-400,000,000		Debenture A (9%)	100,000,000
Other LT Fixed Assets	480,000,000		Debenture B (10%)	400,000,000
Minority Interest	200,000,000
			Common (Par $0.50)	50,000,000
			Surplus	250,000,000
			Retained Earn.	374,900,000
Total Assets	1,652,240,000		Total (Liab + Eq)	1,652,240,000

$41 Price per Share

1.2 Beta (Forman Corp.)

4% Risk-Free Rate

10% Expected Return on Market

40% Tax Rate