Please answer the attached questions in EXCEL format considering : T= writing . formula=formula not numbers . F=number only .C=calculation .

Question1: A company is 40% financed by risk-free debt. The interest rate is 10%, the expected market risk premium is 8%, and the beta of the company's common stock is .5. Risk Free Debt Interest Rate Market Risk Premium Beta Taxes 40% 10% 8% 0.5 35% a. What is the company cost of capital? b. What is the after-tax WACC, assuming that the company pays tax at a 35% rate? Answers: Step 1: r(d)= r(e)= D/V E/V F C C C TIP: D + E = V Step 2: a. Cost of Capital b. T Formula (in words) Calculation C WACC T C Question 2: Suppose that the expected variable costs of Otobai's project are 33 billion a year and that fixed costs are zero. How does this change the degree of operating leverage (DOL)? a. b. Now recompute the operating leverage assuming that the entire 33 billion of costs are fixed. Answers: See page 243, Table 10.1, of textbook for additional information. Copy is also provided below. a. DOL Formula 1+(Fixed cost + depreciation)/ operating profit b. 1+(Fixed cost + depreciation)/ operating profit Fixed Costs F C F C Question 3: Assume that MM's theory holds with taxes. There is no growth, and the $40 of debt is expected to be permanent. Assume a 40% corporate tax rate. a. How much of the firm's value is accounted for by the debt-generated tax shield? b. How much better off will UF's a shareholder be if the firm borrows $20 more and uses it to repurchase stock? Answer: Step 1: Tax rate - Tc a. Permanent Debt - D b. Additional Debt - D F F F Step 2: Formula (in words) Calculation Calculation a. Tax shield T C b. Tax shield T Benefit to Shareholders C C TIP: difference between a and b Question 4 : A project costs $1 million and has a base-case NPV of exactly zero (NPV = 0). What is the project's APV in the following cases? a. If the firm invests, it has to raise $500,000 by a stock issue. Issue costs are 15% of net proceeds. b. If the firm invests, its debt capacity increases by $500,000. The present value of interest tax shields on this debt is $76,000. Answers: Formula (in words) a. APV stock issue T Calculation C b. APV debt increases T C Question 5: Table 18.11 (p. 484 and also provided below) gives abbreviated balance sheets and income statements for Estee Lauder Companies. Calculate the following ratios: Answers: a. Ratio Return on assets Formula (in words) T CalculationTIP: Interest rate - p. 468 C b. Operating profit margin T C c. Sales-to-assets ratio T C d, Inventory turnover T C e. Debt-equity ratio T C f. Current ratio T C g. Quick ratio T C TIP: p.394 TIP: p.393 Question 6: If a firm pays its bills with a 30-day delay, what fraction of its purchases will be paid in the current quarter? In the following quarter? What if the delay is 60 days? Step 1: Worksheet - 30 day delay 2012 Qtr. 4 2013 Qtr.1 2013 Qtr.2 2013 Qtr.3 2013 Qtr.4 Month of Purchase Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Worksheet - 60 day delay Month of Purchase 2012 Qtr. 4Nov Dec 2013 Qtr.1 Jan Feb Mar 2013 Qtr.2 Apr May Jun 2013 Qtr.3 Jul Aug Sep 2013 Qtr.4 Oct Nov Dec Month for Payment T T T T T T T T T T T T T Step 2: Answers: 30 day delay - Payment made at end of 2013 Qtr1 Fraction from last quarter Fraction from this quarter Fraction for next quarter F F F Fraction from last quarter Fraction from this quarter Fraction for next quarter F F F 60 day delay - Payment made at end of 2013 Qtr1 Month for Payment T T T T T T T T T T T T T T