2. Using CFO Sheila Dowling's 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/ Equity Debt Asset Company: Value Equity Beta Beta Beta Cathleen Sinclair 81.6% 444.9% 2.22 0.25 0.79 General Health & Beauty 16.5% 19.8% 1.95 0.00 1.74 Women's Care Company 10.0% 11.1% 1.14 0.00 1.07 Skin Care Enterprises 23.6% 30.9% 1.35 0.00 1.14 Average 32.9% 49.1% 1.67 0.06 1.18 Debt/ Debt/ Asset Equity Cost of Cost of Value Equity Beta Beta Equity Debt WACC 0.0% 0.0% 1.18 1.18 9.67% 7.75% 9.67% 5.0% 5.3% 1.18 1.22 9.86% 7.75% 9.60% 10.0% 11.1% 1.18 1.26 10.07% 7.75% 9.53% 15.0% 17.6% 1.18 1.31 10.30% 7.75% 9.45% 20.0% 25.0% 1.18 1.36 10.56% 7.75% 9.38% 25.0% 33.3% 1.18 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 7.0x Est. Hansson Enterprise Value 514.5 Existing Net Debt 49.8 Plus: New Expansion Debt 57.8 Total Estimated Debt 107.6 Existing D/V 9.7% Estimated New D/V 20.9% Assumed Debt Beta 0.00 Estimated Cost of Debt 7.75%