2. Using CFO Sheila Dowlings projected WACC schedule, what discount rate would you choose? (Please answer parts A & B and use an exhibit if needed)

a. What Cost of Capital do you consider appropriate to discount the cash flows associated with the expansion? Why?

b. How does your answer in 2(a) compare to a cost of capital calculated based on market comps?

Exhibit 7: Cost of Capital Analysis Debt Debt Asset Debt Equity Value Company Cathleen Sinclair Equity Beta Beta Beta 81.6% 444.9% 2.22 0.25 0.79 General Health & Beauty Women's Care Company Skin Care Enterprises Average 19.8% 16.5% 1.95 0.00 1.74 10.0% 11.1% 1.14 0,00 1.07 23.6% 30.9% 135 O.00 1.14 1.67 32.9% 49.1% 0,06 1.18 Debt/ Debt Equity Cost of Asset Cost of WACC Value Debt Equity Beta Beta Equity 0.0% 0.0% 1.18 1.18 9.67% 7.75% 9.67% 9.60% 5.0% 5.3% 1.18 1.22 9.86% 7.75% 10.0% 15.0% 1.26 11.1% 1.18 10.07% 7.75% 9.53% 9.45% 17.6% 1.31 10.30% 1.18 7.75% 10.56% 1.36 20.0% 25.0% 1.18 7.75% 9.38% 1.18 25.0% 33.3% 1.42 10.86% 7.75% 9.31% Assumptions: 10-Year Treasury 3.75% Market Risk Premium 5.00% Tax Rate 40.0% Est. Hansson EBITDA Multiple Est. Hansson Enterprise Value 7.0x 514.5 Existing Net Debt Plus: New Expansion Debt 49.8 57.8 Total Estimated Debt 107.6 Existing D/V Estimated New D/V 9.7% 20.9% Assumed Debt Beta 0,00 Estimated Cost of Debt 7.75%