1. Determine the capital structure (market value weights to two decimal places) for the Boil in Oil French Fry Company that has the following securities:

• Bank Loan: The company states that it currently has a newly issued $15 million bank loan at a prime rate +1.75%
• Debt: The company has two bond issues. The first bond matures in 5 years, has an 8% coupon with a face value of $35 million and a yield to maturity of 7.5%. The second bond has a face value of $65 million, a 4% coupon, matures in 8 years and has yield to maturity of 6.0%.
• Preferred Stock: The companys preferred stock has a book value of $25 per stock but sells for $65 per stock. There are 1.4 million shares outstanding
• Common Equity: The companys common stock sells for $45 per share. There are 12 million shares outstanding.

2. The market value of Aardvark Corp. as of December 31, 2017 was $750 million. The firms current capital market structure is on target and is as follows:

Debt: $150 mil

Preferred Stock: $50 mil

Common Stock: $550 mil

Using data in the Wall ST Journal, the companys bonds are calculated to have a nominal yield to maturity of 5.5%. The companys preferred stock sells for 100 per share and pays an annual dividend of $6.25 per share. The companys common stock sells for $80 per share Nd is expected to pay dividend of $10 per share by the end of this year (i.e. Div1=10). The dividend is expected to grow at a constant rate of 6% a year. The yield on T-bills is 4.9% while the market risk premium is believed to be 8%. Aardvark is an aggressive stock with Beta 1.7. The company tax rate is 35%.

Compute the market value weights, each component cost of capital and Weighted average cost of capital (WACC) to two decimal places

3. Answer the Following unrelated questions (a&b) regarding risk and return:
   1. Based on the following data, compute the Beta for Zebra Corp

Month	Market Return %	Zebra Corp return %
1	2	1.6
2	2	2
3	2	5.4
4	-2	-5.4
5	-2	-1.6
6	-2	-2

3. 2. The CAPM (Capital Asset Pricing Model) is often used to evaluate the performance of professional money management. Suppose that Fraudulent Mutual Fund has a 12-year average annual rate of 20%. With a beta 2.2. The S&P 500 (market) index grew 14% per year over the same period and the average T-bill (risk free) yield was 4%. The manager of the fund claims that the reason to buy his fund is that it has beaten the market by a margin of 6% of yea. Evaluate the managers claim and should buy the fund? (Hint do you believe that the mutual fund has outperformed the market if the CAPM is valid to represent the risk return relationship, i.e. wat return would you expect from this fund given its level of riskiness)
4. Congratulations! While studying Feverishly in the college Library, you accidently stumbled upon the secrets of the worlds first laser can opener. You would like to develop your idea for the betterment of mankind. You have some ideas about how to produce the market these little beauties. Initial funding for the project has been provided by venture capitalist, and initial market acceptance has been favorable. You would love to crank up production and think that perhaps its time to go public.
   1. Explain in detail: the role of venture capitalist (who are they, how they provide funds, how they are compensated)
   2. Why might entrepreneurs and venture capitalist be eager to go public?
   3. What is the role (three functions) of underwriters in an IPO? Fully explain the difference between a firm commitment and best efforts underwriting and how underwriters are compensated.
   4. Also fully explain the role of Federal (who, why, how and state regulatory agencies in the IOP process (Hint: it looks a little fishy to me)