3. Using CFO Sheila Dowlings projected weighted-average-cost of capital (WACC) schedule, what discount rate would you choose? What flaws, if any, might be inherent in using the WACC as the discount rate?

Exhibit 7: Cost of Capital Analysis Company: Cathleen Sinclair General Health & Beauty Women's Care Company Skin Care Enterprises Average Debt/ Value 81.6% 16.5% 10.0% 23.6% 32.9% Debt/ Equity 444.9% 19.8% 11.1% 30.9% 49.1% Equity Beta 2.22 1.95 1.14 1.35 1.67 Debt Beta 0.25 0.00 0.00 0.00 0.06 Asset Beta 0.79 1.74 1.07 1.14 1.18 Debt/ Value 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Debt/ Equity 0.0% 5.3% 11.1% 17.6% 25.0% 33.3% Asset Beta 1.18 1.18 1.18 1.18 1.18 1.18 Equity Beta 1.18 1.22 1.26 1.31 1.36 1.42 Cost of Equity 9.67% 9.86% 10.07% 10.30% 10.56% 10.86% Cost of Debt WACC 7.75% 9.67% 7.75% 7.75% 9.53% 7.75% 9.45% 7.75% 9.38% 7.75% 9.31% Assumptions: 10-Year Treasury Market Risk Premium 3.75% 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 Total Estimated Debt 49.8 57.8 107.6 Existing D/V Estimated New D/V 9.7% 20.9% Assumed Debt Beta Estimated Cost of Debt 0.00 7.75%