Can someone help me with Problem 1 and 3 working through it

FINA3361\t-Business\tFinance\t(II) DECLARATION\tCOVER\tSHEET\tFOR\tASSIGNMENTS NAME: STUDENT\tNUMBER: SECTION: PROFESSOR: _______________ ASSIGNMENT\tNUMBER: 3 \"It\tis\tthe\tstudent's\tresponsibility\tto\thave\ta\treasonable\tlevel\tof\tmaturity\tand\tself-discipline. ......\tThere may\tbe\ttimes\twhere\tthere\tmay\tbe\tpressure\tto\tobtain\thigh\tgrades\tthrough\tdishonest\tmeans\t-\tcheating or\tplagiarism. The\tintegrity\tof\tthe\tUniversity\tand\tthe\tdegrees\tare\tcompromised\tby\tsuch\tactivities\tand such\tacts\tare\tnot\ttolerated\tunder\tany\tcircumstances. The\tUniversity\twill\tundertake\tappropriate disciplinary\taction.\" Saint\tMary's\tUniversity\tCalendar,\tAcademic\tRegulation\t19\t-\tsection\ta. \"Plagiarism\tis\tthe\tpresentation\tof\twords,\tideas\tor\ttechniques\tof\tanother\tas\tone's\town. Reference\tto\tor appropriation\tof\tanother's\twork\tby\tdirect\tquotation\tor\tparaphrase\tmust\tbe\tacknowledged\tby\tproper citation.\t....\tThe\tabove\tdefinition\tof\tplagiarism\tis\tnot\trestricted\tto\tliterary\tworks\tand\tapplies\tto\tall\tforms of\tinformation\tor\tideas\tthat\tbelong\tto\tanother\t(e.g.\tcomputer\tprograms,\tmathematical\tsolutions, scientific\texperiments,\tgraphical\timages\tor\tdata).\tSaint\tMary's\tUniversity\tCalendar,\tAcademic Regulation\t19\t-\tsection\tb. \"Cheating\tis\tthe\tattempt\tto\tsecure\ta\tgrade\tby\tunethical\tmeans. Knowingly\tassisting\tsomeone\tto\tcheat is\titself\tcheating. Cheating\twould\tinclude\tsuch\tpractices\tas: (i) arranging\tfor\tsomeone\tto\timpersonate\toneself\tat\tan\texamination\tor\tthe\timpersonation\tof another\tat\tan\texamination; (ii) requesting,\tproviding\tor\taccepting\tunauthorized\tassistance\ton\ta\ttest; (iii) possession\tof\tunauthorized\tmaterials\tat\ta\ttest; (iv) unauthorized\tprocurement\tof\ta\tcopy\tof\tan\texam; Anybody\tobserved\tcommitting\tone\tof\tthe\tabove\toffenses\tis\tpresumed\tguilty\tof\tcheating\tunless\tthe student\tcan\testablish\this/her\tinnocence.\"\tSaint\tMary's\tUniversity\tCalendar,\tAcademic\tRegulation\t19\t- section\tc. This\tincludes\tthe\tcopying\tof\tanother\tstudent's\twork\t-\tauthorized\tor\tunauthorized. A\tmark\tof\tzero\twill\tbe\tassigned\tto\tany\tassignment\tthat\tviolates\tany\tof\tthe\tabove. The\tstudent\taffirms\tthat This\tassignment\tis\tnot\tcopied\tand\tis\tof\tmy\town\twork. I\thave\tacknowledged\tsource\tmaterial\tthrough\tproper\tcitations\tor\treferences Signature: Date: Assignments\tsubmitted\twithout\tthis\tcover\tsheet\twill\treceive\ta\tmark\tof\t0 FINA3361\tA3 Page\t1 SAINT MARY'S UNIVERSITY FINANCE, INFORMATION SYSTEMS, & MANAGEMENT SCIENCE FINANCE\t3361.1 ASSIGNMENT\t#3 DUE\tFRIDAY\tJUNE\t10\tAT\t12:00\tNOON TOTAL\tVALUE\t=\t50\tMARKS Problem\t#1(19\tmarks) Serena's\tSoaps\tis\tplanning\ta\tmajor\texpansion\tprogram\trequiring\t$5,000,000\tin\tfinancing. Serena's\tmay sell\tbonds\twith\tan\t8%\tcoupon\trate\tor\tsell\t200,000\tshares\tof\tcommon\tstock\tto\tget\tthe\tneeded\tfunds. After\tthe\texpansion\tthere\tis\ta\t30%\tprobability\tof\tEBIT\t(Earnings\tBefore\tInterest\tand\tTaxes)\tbeing\t$2 million,\ta\t50%\tprobability\tof\tit\tbeing\t$3\tmillion\tand\ta\t20%\tprobability\tof\tit\tbeing\t$4\tmillion. The following\tdata\twas\ttaken\tfrom\tthe\tfirm's\tpre-expansion\tincome\tstatement: Interest\texpense $100,000 Tax\tRate 40% Common\tshares\toutstanding 300,000 a) Calculate\tthe\tEPS\tbased\ton\tthe\texpected\tEBIT\tunder\teach\talternative.\t(5\tmarks) b) Which\tplan\twould\tyou\tchose\tat\tthis\tlevel\tof\tEBIT?\t(1\tmark) c) Compute\tthe\tDFL\t(Degree\tof\tFinancial\tLeverage)\tunder\teach\tfinancing\talternative. If\tEBIT increased\tby\t10%,\twhat\twould\tthe\tnew\tEPS\tbe\tunder\teach\talternative?\t(6\tmarks) d) What\tlevel\tof\tEBIT\twould\tyield\tthe\tsame\tEPS\tfor\tthe\tstock\tand\tdebt\talternatives?\t(5\tmarks) e) What\tEPS\tcorresponds\tto\tthis\tlevel\tof\tEBIT?\t(2\tmarks) Problem\t#2\t(5\tmarks) Rory's\tRefrigeration\tis\tconsidering\ttwo\tdifferent\tfinancing\tplans. Under\tplan\tI\tthe\tinterest\twould\tbe\t9% on\t$100,000\tface\tvalue\tbonds.\tUnder\tplan\tII\tthe\tinterest\twould\tbe\t$3,000\twith\t1,375\tshares\tof common\tstock\toutstanding.\tIf\tthe\tindifference\tpoint\tis\t$25,000\tand\tthe\ttax\trate\tis\t30%,\thow\tmany shares\tof\tcommon\tstock\tare\toutstanding\tfor\tplan\tI? Problem\t#3\t(10\tmarks) Below\tis\tIncome\tStatement\tinformation\tfor\tRaymond's\tRainsuits. Revenue:\t$3,107,262 Variable\tcosts:\t30%\tof\trevenue Fixed\tcosts:\t$1,000,000 Depreciation:\t$475,000 Bond\tIssue\tA:\t$300,000\tface\tvalue,\t10%\tcoupon Bond\tIssue\tB:\t$500,000\tface\tvalue,\t8%\tcoupon Bond\tIssue\tC:\t$900,000\tface\tvalue,\t12%\tcoupon Tax\trate:\t40% Common\tshares\tissued\tand\tOutstanding: 250,000 a. Calculate\tthe\tdegree\tof\toperating\tleverage\tfor\tthe\tfirm. (2\tmarks) b. Calculate\tthe\tdegree\tof\tfinancial\tleverage\tfor\tthe\tfirm.\t(2\tmarks) FINA3361\tA3 Page\t2 c. Calculate\tthe\tdegree\tof\tcombined\tleverage\tfor\tthe\tfirm.\t(2\tmarks) d. If\tthe\tcompany\tis\table\tto\tincrease\ttheir\tsales\tby\t15%,\twhat\tpercentage\tincrease\tin\tEPS\twould\tyou expect\tto\tobserve?\t(2\tmarks) e. If\tthe\tsales\tincrease\tby\t15%,\twhat\twill\tthe\tnew\tEPS\tbe? (2\tmarks) Problem\t#4\t(6\tmarks) McDowells\tMachinery\tis\tan\tunlevered\tfirm.\tThe\tcurrent\tmarket\tvalue\tof\tits\tequity\tis\t$17.5\tmillion. a.\tIf\tthere\tare\tno\ttaxes\tand\tthe\tEBIT\tis\t$2,012,500,\twhat\tis\tthe\tcost\tof\tequity?\tWhat\tis\tthe\tWACC? b. If the tax rate is 35%, what is the EBIT if the unlevered cost of equity is 11.5%? What is the WACC? (Assume\tthere\tis\tno\tcost\tof\tfinancial\tdistress\tand\tgeneral\tM&M\tassumptions\tapply) Problem\t#5\t(10\tmarks) Curry\tConstruction\tInc.\thas\tan\tunlevered\tcost\tof\tequity\tis\t13.5%\twith\ta\tpre-tax\tcost\tof\tdebt\tof\t9%.\tBoth the\tbook\tand\tthe\tmarket\tvalue\tof\tdebt\tis\t$265,000.\tEarnings\tbefore\tinterest\tand\ttaxes\tare\t$149,000 and\tthe\ttax\trate\tis\t34%. What\tis\tCurry\tConstruction's\tweighted\taverage\tcost\tof\tcapital?\t(Assume\tthere\tis\tno\tcost\tof\tfinancial distress). Additional\tPractice\tProblem\t(not\trequired\tto\tsubmit) Lowry\tLumber\tLimited\thas\tan\tEBIT\tof\t$450,000\tthat\tit\texpects\tit\twill\tearn\tforever,\tand\tit\tpays\tall\tof\tit's earnings\tas\tdividends\tto\tshareholders\t(ie.,\tno\tgrowth).\tThe\tfirm\thas\ta\tcorporate\ttax\trate\tof\t40%\tand\thas an\tun-levered\tbeta\tof\t.90. The\tfirm\thas\t92,656\tcommon\tshares\tissued\tand\toutstanding. In\tthe\tmarket, you\tobserve\tthat\tGovernment\tT-bills\tare\tbeing\tsold\tto\tyield\t4%\tand\tthe\tS&P/TSX\tComposite\tIndex\tis expected\tto\tyield\t10%. Assuming\ta\tworld\tof\ttaxes\tand\ta\tcost\tfor\tthe\trisk\tof\tdefault, a) Calculate\tthe\tvalue\tof\tthe\tfirm. b) Calculate\tthe\tWACC\tfor\tthe\tfirm. c) What\tis\tthe\tvalue\tof\ta\tshare\tin\tthe\tcompany\tand\twhat\tis\tthe\tEPS? d) What\tis\tthe\tvalue\tof\tthe\tfirm\tif\tthe\tfirm\tissues\t$600,000\tof\tbonds\tat\ta\tcoupon\trate\tof\t7.5%?\tThe beta\tfor\tthe\tequity\tof\tthe\tleveraged\tfirm\tis\t1.02. e) What\tis\tthe\tWACC\tfor\tthe\tfirm\twith\tits\tnew\tcapital\tstructure? FINA3361\tA3 Page\t3