Please answer these questions. This is Finance 325. Intermediate Finance.

FIN 325 Homework 4 Professor Tim Trombley Please answer the following questions. Please write all your work. You will be graded on your process, NOT on achieving the correct answer. Please staple all pages together. Include your name on every page. This is due at the beginning of class on Tuesday, November 1st. Late homeworks will not be accepted. 1. Tiara Wings Ltd is a firm that makes Tiaras and chicken wings. The firm has projected its future growth in the table below. Assuming this table is correct, compute the value per share. The firm has WACC of 12%, the long-run growth rate after year 5 is 4%. The firm has $5 million in debt and 865,000 shares outstanding. The accounting statement is in thousands of $. 1. 2. 3. 4. 5. 6. 7. 8. Sales Cost of Goods Sold Other Costs EBITDA (1 - 2 - 3) Depreciation and Amortization EBIT (pretax profit) (4 - 5) Tax at 35% Profit after Tax (6 - 7) 9. 10. Change in Working Capital Investment (change in gross PP&E) -1 39,357.0 18,564.0 7,645.0 13,148.0 5,745.0 7,403.0 2,591.1 4,811.0 Latest Year 0 40,123.0 22,879.0 8,025.0 9,219.0 5,678.0 3,541.0 1,239.4 2,301.7 1 36,351.0 21,678.0 6,797.0 7,876.0 5,890.0 1,986.0 695.1 1,290.9 566.0 784.0 6,467.0 6,547.0 2 30,155.0 17,560.0 5,078.0 7,517.0 5,670.0 1,847.0 646.5 1,200.6 Forecast 3 28,345.0 16,459.0 4,678.0 7,208.0 5,908.0 1,300.0 455.0 845.0 4 29,982.0 15,631.0 4,987.0 9,364.0 6,107.0 3,257.0 1,140.0 2,117.1 5 30,450.0 14,987.0 5,134.0 10,329.0 5,908.0 4,421.0 1,547.4 2,873.7 -54.0 -342.0 -245.0 127.0 235.0 7,345.0 5,398.0 5,470.0 6,420.0 6,598.0 2. Your run a toy company that is considering updating your electric tricycle line. The upgrades will cost $30 million today and will add a fixed cost of $1 million per year, but will decrease your variable costs by $40 per unit. This project will be good for 5 years, and will have no cash flows after that. Assume 5-year straight-line depreciation, a 40% tax rate, and a 10% cost of capital. (Hint: see chapter 10) a. What is the NPV of this project if you sell 300,000 units per year? b. What is the break-even number of units you must sell in order to make this project profitable? 3. The Balance Sheet for Pfizer, Inc. is listed below. According to p.106 of Appendix A of the firm's 2015 financial statement, Pfizer has $3.3 billion in unfunded pension obligations that are included as part of noncurrent liabilities. The average interest rate on its long-term loans is 5.18%. In 2015, the firm paid $6.94 billion in dividends, a 5% increase per share over 2014. This growth rate is expected to be constant. Pfizer has 6 billion shares of common stock and is currently trading at $35/share. Its marginal tax rate is 30%. Find Pfizer's cost of equity capital, opportunity cost of capital, and weighted average cost of capital. Pfizer Balance Sheet (all numbers in millions) Period Ending 12/31/2015 Current Assets Cash And Cash Equivalents 3,641 Short Term Investments 19,649 Net Receivables 10,838 Inventory 7,513 Other Current Assets 2,163 Total Current Assets 43,804 Long Term Investments 15,999 Property Plant and Equipment 13,766 Goodwill 48,242 Intangible Assets 40,356 Other Assets 3,499 Deferred Long Term Asset Charges 1,794 Total Assets 167,460 Liabilities Accounts Payable 8,249 Short/Current Long Term Debt 10,160 Other Current Liabilities 10,990 Total Current Liabilities 29,399 Long Term Debt 32,810 Other Liabilities 13,376 Deferred Long Term Liab. Charges 26,877 Minority Interest 278 Total Liabilities 102,741 Stockholders' Equity Misc. Stocks Options Warrants Redeemable Preferred Stock Preferred Stock Common Stock 459 Retained Earnings 71,993 Treasury Stock -79,252 Capital Surplus 81,016 Other Stockholder Equity -9,496 Total Stockholder Equity 64,720 Net Tangible Assets -23,878 12/31/2014 3,343 32,779 10,967 5,663 2,843 55,595 17,518 11,762 42,069 35,166 3,513 1,944 167,566 7,293 5,141 9,153 21,587 35,894 15,147 23,317 321 96,265 455 72,176 -73,021 78,977 -7,286 71,301 -5,934