Complete the following problem sets from the "Problems" section in Chapters 18, 22, and 24 ofFinancial Management: Theory and Practice.

1. Chapter 18: 18-1 and 18-2
2. Chapter 22: 22-1 and 22-2
3. Chapter 24: 24-1

must be in excel. Need byWednesday June 28

18-1) Security Brokers Inc. specializes in underwriting new issues by small firms. On a recent offering of Beedles Inc., the terms were as follows: Price to public $5 per share Number of shares 3 million Proceeds to Beedles $14,000,000 The out-of-pocket expenses incurred by Security Brokers in the design and distribution of the issue were $300,000. What profit or loss would Security Brokers incur if the issue were sold to the public at the following average price? a. $5 per share b. $6 per share c. $4 per share 18.2 The Beranek Company, whose stock price is now $25, needs to raise $20 million in common sThe Beranek Company, whose stock price is now $25, needs to raise $20 million in common stock. Underwriters have informed the firm's management that they must price the new issue to the public at $22 per share because of signaling effects. The underwriters' compensation will be 5% of the issue price, so Beranek will net $20.90 per share. The firm will also incur expenses in the amount of $150,000. How many shares must the firm sell to net $20 million after underwriting and flotation expenses?tock. Underwriters have informed the firm's management that they must price the new issue to the public at $22 per share because of signaling effects. The underwriters' compensation will be 5% of the issue price, so Beranek will net $20.90 per share. The firm will also incur expenses in the amount of $150,000. How many shares must the firm sell to net $20 million after underwriting and flotation expenses? Vandell's free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 5% a year; its beta is 1.4. What is the value of Vandell's operations? If Vandell has $10.82 million in debt, what is the current value of Vandell's stock? (Hint: Use the corporate valuation model from Chapter 7.) (22-1) Hastings estimates that if it acquires Vandell, interest payments will be $1.5 million per year for 3 years, after which the current target capital structure of 30% debt will be maintained. Interest in the fourth year will be $1.472 million, after which interest and the tax(22-1) Vandell's free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 5% a year; its beta is 1.4. What is the value of Vandell's operations? If Vandell has $10.82 million in debt, what is the current value of Vandell's stock? (Hint: Use the corporate valuation model from Chapter 7.) (22-2) Hastings estimates that if it acquires Vandell, interest payments will be $1.5 million per year for 3 years, after which the current target capital structure of 30% debt will be maintained. Interest in the fourth year will be $1.472 million, after which interest and the tax shield will grow at 5%. Synergies will cause the free cash flows to be $2.5 million, $2.9 million, $3.4 million, and $3.57 million in Years 1 through 4, respectively, after which the free cash flows will grow at a 5% rate. What is the unlevered value of Vandell, and what is the value of its tax shields? What is the per share value of Vandell to Hastings Corporation? Assume that Vandell now has $10.82 million in debt. shield will grow at 5%. Synergies will cause the free cash flows to be $2.5 million, $2.9 million, $3.4 million, and $3.57 million in Years 1 through 4, respectively, after which the free cash flows will grow at a 5% rate. What is the unlevered value of Vandell, and what is the value of its tax shields? What is the per share value of Vandell to Hastings Corporation? Assume that Vandell now has $10.82 million in debt. (22-2) (24-1) Southwestern Wear Inc. has the following balance sheet: Current assets $1,875,000 Accounts payable $ 375,000 Fixed assets 1,875,000 Notes payable 750,000 Subordinated debentures 750,000 Total debt $1,875,000 ---------- Common equity 1,875,000 Total assets $3,750,000 Total liabilities and equity $3,750,000 The trustee's costs total $281,250, and the firm has no accrued taxes or wages. The debentures are subordinated only to the notes payable. If the firm goes bankrupt and liquidates, how much will each class of investors receive if a total of $2.5 million is received from sale of the assets? 18-1: Price Shares Proceeds Distribution $5 3,000,000 $14,000,000 $300,000 a) Average share price $5 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss $700,000 b) Average share price $6 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss $3,700,000 c) Average share price $4 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss ($2,300,000) 18-2: Capital Net price Expenses $20,000,000 $20.90 $150,000 Number of shares `=(Capital + Expenses)/ Net price Number of shares $964,114.83 22-1: FCF0 Growth rate Beta Debt Risk-free rate Risk-premium Weight of debt Weight of equity Cost of debt Tax rate Number of shares outstanding Cost of equity Cost of equity WACC WACC Value Value of equity Price per share $2,000,000 5% 1.4 $10,820,000 5% 6% 30% 70% 8% 40% 1,000,000 `=Risk-free rate + Beta * Risk premium 13.40% `=weight of debt * cost of debt * (1- Tax rate) + weight of equity * cost of equity 10.8200% $36,082,474.23 $25,262,474.23 $25.26 22-2: Interest payment Year 1- Year 3 FCF0 Interest in 4th year FCF1 FCF2 FCF3 FCF4 Growth rate Beta Debt Risk-free rate Risk-premium Weight of debt Weight of equity Cost of debt Tax rate Number of shares outstanding Cost of equity Cost of equity WACC unlevered WACC unlevered Interest tax shield Year 1- 3 Interest tax shield Year 4 interest tax shield Terminal value Terminal value Year Interest tax shield Terminal value Total value PV of interest tax shield Unlevered terminal FCF value Present value of FCF Total value $1,500,000 $2,000,000 $1,472,000 $2,500,000 $2,900,000 $3,400,000 $3,570,000 5% 1.4 $10,820,000 5% 6% 30% 70% 8% 40% 1,000,000 `=Risk-free rate + Beta * Risk premium 13.40% `=(weight of debt * cost of debt)+ (weight of equity * cost of equity) 11.7800% `=interest * tax rate $600,000 $588,800 `=Year 4 interest tax shield * (1+ growth rate) / (Unlevered cost of cap $9,118,584 1 $600,000 2 3 $600,000 $600,000 $600,000 $600,000 $600,000 $7,664,493.82 $55,287,611 $44,692,299 ### 4 $588,800 $9,118,584 $9,707,384 Share price Share price `=Value - debt / Number of shares $41.54 equity * cost of equity) e) / (Unlevered cost of capital - Growth rate) 24-1: Current asset Accounts payable Fixed assets Notes payable Subordinate debenture Total debt Common equity Total assets Total liabilities Trustee cost Sales of assets Total receipt from sales Amount available to investor Amount available to investor Amount paid to each class: Accounts payable Notes payable amount Subordinate debenture Total debt $1,875,000 $375,000 $1,875,000 $750,000 $750,000 $1,875,000 $1,875,000 $3,750,000 $3,750,000 $281,250 $2,500,000 $2,500,000 `= Total receipt - Trustee cost $2,218,750 $375,000 $750,000 $750,000 $1,875,000 Amount availabe to stockholder`=Amount available to investor - Total debt Amount availabe to stockholde $343,750 18-1: Price Shares Proceeds Distribution $5 3,000,000 $14,000,000 $300,000 a) Average share price $5 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss $700,000 b) Average share price $6 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss $3,700,000 c) Average share price $4 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss ($2,300,000) 18-2: Capital Net price Expenses $20,000,000 $20.90 $150,000 Number of shares `=(Capital + Expenses)/ Net price Number of shares $964,114.83 22-1: FCF0 Growth rate Beta Debt Risk-free rate Risk-premium Weight of debt Weight of equity Cost of debt Tax rate Number of shares outstanding Cost of equity Cost of equity WACC WACC Value Value of equity Price per share $2,000,000 5% 1.4 $10,820,000 5% 6% 30% 70% 8% 40% 1,000,000 `=Risk-free rate + Beta * Risk premium 13.40% `=weight of debt * cost of debt * (1- Tax rate) + weight of equity * cost of equity 10.8200% $36,082,474.23 $25,262,474.23 $25.26 22-2: Interest payment Year 1- Year 3 FCF0 Interest in 4th year FCF1 FCF2 FCF3 FCF4 Growth rate Beta Debt Risk-free rate Risk-premium Weight of debt Weight of equity Cost of debt Tax rate Number of shares outstanding Cost of equity Cost of equity WACC unlevered WACC unlevered Interest tax shield Year 1- 3 Interest tax shield Year 4 interest tax shield Terminal value Terminal value Year Interest tax shield Terminal value Total value PV of interest tax shield Unlevered terminal FCF value Present value of FCF Total value $1,500,000 $2,000,000 $1,472,000 $2,500,000 $2,900,000 $3,400,000 $3,570,000 5% 1.4 $10,820,000 5% 6% 30% 70% 8% 40% 1,000,000 `=Risk-free rate + Beta * Risk premium 13.40% `=(weight of debt * cost of debt)+ (weight of equity * cost of equity) 11.7800% `=interest * tax rate $600,000 $588,800 `=Year 4 interest tax shield * (1+ growth rate) / (Unlevered cost of cap $9,118,584 1 $600,000 2 3 $600,000 $600,000 $600,000 $600,000 $600,000 $7,664,493.82 $55,287,611 $44,692,299 ### 4 $588,800 $9,118,584 $9,707,384 Share price Share price `=Value - debt / Number of shares $41.54 equity * cost of equity) e) / (Unlevered cost of capital - Growth rate) 24-1: Current asset Accounts payable Fixed assets Notes payable Subordinate debenture Total debt Common equity Total assets Total liabilities Trustee cost Sales of assets Total receipt from sales Amount available to investor Amount available to investor Amount paid to each class: Accounts payable Notes payable amount Subordinate debenture Total debt $1,875,000 $375,000 $1,875,000 $750,000 $750,000 $1,875,000 $1,875,000 $3,750,000 $3,750,000 $281,250 $2,500,000 $2,500,000 `= Total receipt - Trustee cost $2,218,750 $375,000 $750,000 $750,000 $1,875,000 Amount availabe to stockholder`=Amount available to investor - Total debt Amount availabe to stockholde $343,750 18-1: Price Shares Proceeds Distribution $5 3,000,000 $14,000,000 $300,000 a) Average share price $5 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss $700,000 b) Average share price $6 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss $3,700,000 c) Average share price $4 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss ($2,300,000) 18-2: Capital Net price Expenses $20,000,000 $20.90 $150,000 Number of shares `=(Capital + Expenses)/ Net price Number of shares $964,114.83 22-1: FCF0 Growth rate Beta Debt Risk-free rate Risk-premium Weight of debt Weight of equity Cost of debt Tax rate Number of shares outstanding Cost of equity Cost of equity WACC WACC Value Value of equity Price per share $2,000,000 5% 1.4 $10,820,000 5% 6% 30% 70% 8% 40% 1,000,000 `=Risk-free rate + Beta * Risk premium 13.40% `=weight of debt * cost of debt * (1- Tax rate) + weight of equity * cost of equity 10.8200% $36,082,474.23 $25,262,474.23 $25.26 22-2: Interest payment Year 1- Year 3 FCF0 Interest in 4th year FCF1 FCF2 FCF3 FCF4 Growth rate Beta Debt Risk-free rate Risk-premium Weight of debt Weight of equity Cost of debt Tax rate Number of shares outstanding Cost of equity Cost of equity WACC unlevered WACC unlevered Interest tax shield Year 1- 3 Interest tax shield Year 4 interest tax shield Terminal value Terminal value Year Interest tax shield Terminal value Total value PV of interest tax shield Unlevered terminal FCF value Present value of FCF Total value Share price $1,500,000 $2,000,000 $1,472,000 $2,500,000 $2,900,000 $3,400,000 $3,570,000 5% 1.4 $10,820,000 5% 6% 30% 70% 8% 40% 1,000,000 `=Risk-free rate + Beta * Risk premium 13.40% `=(weight of debt * cost of debt)+ (weight of equity * cost of equity) 11.7800% `=interest * tax rate $600,000 $588,800 `=Year 4 interest tax shield * (1+ growth rate) / (Unlevered cost of cap $9,118,584 1 $600,000 2 3 $600,000 $600,000 $600,000 $7,664,493.82 $600,000 $600,000 $55,287,611 $44,692,299 $52,356,792.90 `=Value - debt / Number of shares 4 $588,800 $9,118,584 $9,707,384 Share price $41.54 equity * cost of equity) ) / (Unlevered cost of capital - Growth rate) 24-1: Current asset Accounts payable Fixed assets Notes payable Subordinate debenture Total debt Common equity Total assets Total liabilities Trustee cost Sales of assets Total receipt from sales Amount available to investor Amount available to investor Amount paid to each class: Accounts payable Notes payable amount Subordinate debenture Total debt $1,875,000 $375,000 $1,875,000 $750,000 $750,000 $1,875,000 $1,875,000 $3,750,000 $3,750,000 $281,250 $2,500,000 $2,500,000 `= Total receipt - Trustee cost $2,218,750 $375,000 $750,000 $750,000 $1,875,000 Amount availabe to stockholder`=Amount available to investor - Total debt Amount availabe to stockholde $343,750 22-2: Interest payment Year 1- Year 3 FCF0 Interest in 4th year FCF1 FCF2 FCF3 FCF4 Growth rate Beta Debt Risk-free rate Risk-premium Weight of debt Weight of equity Cost of debt Tax rate Number of shares outstanding Cost of equity Cost of equity WACC unlevered WACC unlevered Interest tax shield Year 1- 3 Interest tax shield Year 4 interest tax shield Terminal value Terminal value Year Interest tax shield Terminal value Total value PV of interest tax shield Unlevered terminal FCF value Present value of FCF Total value Share price Share price $1,500,000 $2,000,000 $1,472,000 $2,500,000 $2,900,000 $3,400,000 $3,570,000 5% 1.4 $10,820,000 5% 6% 30% 70% 8% 40% 1,000,000 `=Risk-free rate + Beta * Risk premium 13.40% `=(weight of debt * cost of debt)+ (weight of equity * cost of equity 11.7800% `=interest * tax rate $600,000 $588,800 `=Year 4 interest tax shield * (1+ growth rate) / (Unlevered cost of $9,118,584 1 $600,000 2 3 $600,000 $600,000 $600,000 $7,664,493.82 $600,000 $600,000 $55,287,611 $44,692,299 $52,356,792.90 `=Value - debt / Number of shares $41.54 (weight of equity * cost of equity) growth rate) / (Unlevered cost of capital - Growth rate) 4 $588,800 $9,118,584 $9,707,384 18-1: Price Shares Proceeds Distribution $5 3,000,000 $14,000,000 $300,000 a) Average share price $5 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss $700,000 b) Average share price $6 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss $3,700,000 c) Average share price $4 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss ($2,300,000) 18-2: Capital Net price Expenses $20,000,000 $20.90 $150,000 Number of shares `=(Capital + Expenses)/ Net price Number of shares $964,114.83 22-1: FCF0 Growth rate Beta Debt Risk-free rate Risk-premium Weight of debt Weight of equity Cost of debt Tax rate Number of shares outstanding Cost of equity Cost of equity WACC WACC Value Value of equity Price per share $2,000,000 5% 1.4 $10,820,000 5% 6% 30% 70% 8% 40% 1,000,000 `=Risk-free rate + Beta * Risk premium 13.40% `=weight of debt * cost of debt * (1- Tax rate) + weight of equity * cost of equity 10.8200% $36,082,474.23 $25,262,474.23 $25.26 22-2: Interest payment Year 1- Year 3 FCF0 Interest in 4th year FCF1 FCF2 FCF3 FCF4 Growth rate Beta Debt Risk-free rate Risk-premium Weight of debt Weight of equity Cost of debt Tax rate Number of shares outstanding Cost of equity Cost of equity WACC unlevered WACC unlevered Interest tax shield Year 1- 3 Interest tax shield Year 4 interest tax shield Terminal value Terminal value Year Interest tax shield Terminal value Total value PV of interest tax shield Unlevered terminal FCF value Present value of FCF Total value $1,500,000 $2,000,000 $1,472,000 $2,500,000 $2,900,000 $3,400,000 $3,570,000 5% 1.4 $10,820,000 5% 6% 30% 70% 8% 40% 1,000,000 `=Risk-free rate + Beta * Risk premium 13.40% `=(weight of debt * cost of debt)+ (weight of equity * cost of equity) 11.7800% `=interest * tax rate $600,000 $588,800 `=Year 4 interest tax shield * (1+ growth rate) / (Unlevered cost of cap $9,118,584 1 $600,000 2 3 $600,000 $600,000 $600,000 $600,000 $600,000 $7,664,493.82 $55,287,611 $44,692,299 ### 4 $588,800 $9,118,584 $9,707,384 Share price Share price `=Value - debt / Number of shares $41.54 equity * cost of equity) e) / (Unlevered cost of capital - Growth rate) 24-1: Current asset Accounts payable Fixed assets Notes payable Subordinate debenture Total debt Common equity Total assets Total liabilities Trustee cost Sales of assets Total receipt from sales Amount available to investor Amount available to investor Amount paid to each class: Accounts payable Notes payable amount Subordinate debenture Total debt $1,875,000 $375,000 $1,875,000 $750,000 $750,000 $1,875,000 $1,875,000 $3,750,000 $3,750,000 $281,250 $2,500,000 $2,500,000 `= Total receipt - Trustee cost $2,218,750 $375,000 $750,000 $750,000 $1,875,000 Amount availabe to stockholder`=Amount available to investor - Total debt Amount availabe to stockholde $343,750 18-1: Price Shares Proceeds Distribution $5 3,000,000 $14,000,000 $300,000 a) Average share price $5 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss $700,000 b) Average share price $6 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss $3,700,000 c) Average share price $4 Profit/Loss `=(Shares* Price) - Proceeds- Distribution Profit/Loss ($2,300,000) 18-2: Capital Net price Expenses $20,000,000 $20.90 $150,000 Number of shares `=(Capital + Expenses)/ Net price Number of shares $964,114.83 22-1: FCF0 Growth rate Beta Debt Risk-free rate Risk-premium Weight of debt Weight of equity Cost of debt Tax rate Number of shares outstanding Cost of equity Cost of equity WACC WACC Value Value of equity Price per share $2,000,000 5% 1.4 $10,820,000 5% 6% 30% 70% 8% 40% 1,000,000 `=Risk-free rate + Beta * Risk premium 13.40% `=weight of debt * cost of debt * (1- Tax rate) + weight of equity * cost of equity 10.8200% $36,082,474.23 $25,262,474.23 $25.26 22-2: Interest payment Year 1- Year 3 FCF0 Interest in 4th year FCF1 FCF2 FCF3 FCF4 Growth rate Beta Debt Risk-free rate Risk-premium Weight of debt Weight of equity Cost of debt Tax rate Number of shares outstanding Cost of equity Cost of equity WACC unlevered WACC unlevered Interest tax shield Year 1- 3 Interest tax shield Year 4 interest tax shield Terminal value Terminal value Year Interest tax shield Terminal value Total value PV of interest tax shield Unlevered terminal FCF value Present value of FCF Total value Share price $1,500,000 $2,000,000 $1,472,000 $2,500,000 $2,900,000 $3,400,000 $3,570,000 5% 1.4 $10,820,000 5% 6% 30% 70% 8% 40% 1,000,000 `=Risk-free rate + Beta * Risk premium 13.40% `=(weight of debt * cost of debt)+ (weight of equity * cost of equity) 11.7800% `=interest * tax rate $600,000 $588,800 `=Year 4 interest tax shield * (1+ growth rate) / (Unlevered cost of cap $9,118,584 1 $600,000 2 3 $600,000 $600,000 $600,000 $7,664,493.82 $600,000 $600,000 $55,287,611 $44,692,299 $52,356,792.90 `=Value - debt / Number of shares 4 $588,800 $9,118,584 $9,707,384 Share price $41.54 equity * cost of equity) ) / (Unlevered cost of capital - Growth rate) 24-1: Current asset Accounts payable Fixed assets Notes payable Subordinate debenture Total debt Common equity Total assets Total liabilities Trustee cost Sales of assets Total receipt from sales Amount available to investor Amount available to investor Amount paid to each class: Accounts payable Notes payable amount Subordinate debenture Total debt $1,875,000 $375,000 $1,875,000 $750,000 $750,000 $1,875,000 $1,875,000 $3,750,000 $3,750,000 $281,250 $2,500,000 $2,500,000 `= Total receipt - Trustee cost $2,218,750 $375,000 $750,000 $750,000 $1,875,000 Amount availabe to stockholder`=Amount available to investor - Total debt Amount availabe to stockholde $343,750 22-2: Interest payment Year 1- Year 3 FCF0 Interest in 4th year FCF1 FCF2 FCF3 FCF4 Growth rate Beta Debt Risk-free rate Risk-premium Weight of debt Weight of equity Cost of debt Tax rate Number of shares outstanding Cost of equity Cost of equity WACC unlevered WACC unlevered Interest tax shield Year 1- 3 Interest tax shield Year 4 interest tax shield Terminal value Terminal value Year Interest tax shield Terminal value Total value PV of interest tax shield Unlevered terminal FCF value Present value of FCF Total value Share price Share price $1,500,000 $2,000,000 $1,472,000 $2,500,000 $2,900,000 $3,400,000 $3,570,000 5% 1.4 $10,820,000 5% 6% 30% 70% 8% 40% 1,000,000 `=Risk-free rate + Beta * Risk premium 13.40% `=(weight of debt * cost of debt)+ (weight of equity * cost of equity 11.7800% `=interest * tax rate $600,000 $588,800 `=Year 4 interest tax shield * (1+ growth rate) / (Unlevered cost of $9,118,584 1 $600,000 2 3 $600,000 $600,000 $600,000 $7,664,493.82 $600,000 $600,000 $55,287,611 $44,692,299 $52,356,792.90 `=Value - debt / Number of shares $41.54 (weight of equity * cost of equity) growth rate) / (Unlevered cost of capital - Growth rate) 4 $588,800 $9,118,584 $9,707,384