ou reviewed the books your parents gave you as you have considered assuming the family business Youve accepted the offer. Congratulations. You are now an entrepreneur.

Youve decided that the business can grow in 2017 based upon some key markets that you can penetrate immediately, due to your networking and marketing skills learned. Based on your analysis, you create a pro forma financial summary:

Financial Pro Forma Forecast Summary for 2017 (all numbers in thousands of USD)

Net Sales 1,200

COGS 500

Depreciation 260

Interest expense 110

Taxes paid 60

Dividends 20

Total Assets 2,000

Net capital spending 200

Net increase in Working capital 30

Net new borrowing 100

Total interest-bearing Debt as of 12/31: 1,900

Based upon the Financial Pro Forma for 2017 provided above, compute the following:

1. Cash flow from assets

2. How much net new equity was raised (or retired)?

3. GIVEN: Risk free rate (RFR) = 4% Beta = 2.5 ERP = 7.5% D/E = 4.0

cost of debt (prior to tax adjustment) = 6.5% tax rate = 33%

FIND: WACC

4. GIVEN: EBIT = 6,000 Depreciation = 250 Taxes = 100

Net Cap Ex = 250 Net Increase in Working Capital = 100

FIND: CFFA

5. GIVEN: Net Income = 5,000 Depreciation = 250 Interest Expense = 750

Net Cap Ex = 275 Net increase in Working Capital = 10

FIND: CFFA

6. GIVEN: RFR = 1.75% Beta = 2.0 ERP = 8.0% D/E = 0.5

Cost of debt (prior to tax adjustment) = 5.0% tax rate = 40%

FIND: WACC