Please assist in answering the excel formulation: 4 Tab questions:

Yerba Industries is an all-equity firm whose stock has a beta of 1.2 and an expected return of 12.5%. Suppose it issues new risk-free debt with a 5% yield and repurchases 40% of its stock. Assume perfect capital markets.
a.	What is the beta of Yerba stock after this transaction?
b.	What is the expected return of Yerba stock after this transaction?
Suppose that prior to this transaction, Yerba expected earnings per share this coming year of $1.50, with a forward P/E ratio (that is, the share price divided by the expected earnings for the coming year) of 14.
c.	What is Yerba?s expected earnings per share after this transaction? Does this change benefit shareholders? Explain.
d.	What is Yerba?s forward P/E ratio after this transaction? Does the P/E ratio go up or down?

4 Problem 14-21 Yerba Industries is an all-equity firm whose stock has a beta of 1.2 and an expected retur 12.5%. Suppose it issues new risk-free debt with a 5% yield and repurchases 40% of its s Assume perfect capital markets. a. What is the beta of Yerba stock after this transaction? b. What is the expected return of Yerba stock after this transaction? Suppose that prior to this transaction, Yerba expected earnings per share this coming yea with a forward P/E ratio (that is, the share price divided by the expected earnings for the year) of 14. c. What is Yerba's expected earnings per share after this transaction? Does this chang shareholders? Explain. d. What is Yerba's forward P/E ratio after this transaction? Does the P/E ratio go up o Unlevered beta Expected return Risk-free rate New debt level 1.20 12.50% 5.00% 40.00% New Debt/Equity Market risk premium a. What is the beta of Yerba stock after this transaction? New beta b. What is the expected return of Yerba stock after this transaction? New expected return on equity Suppose that prior to this transaction, Yerba expected earnings per share this coming yea with a forward P/E ratio (that is, the share price divided by the expected earnings for the year) of 14. c. What is Yerba's expected earnings per share after this transaction? Does this chang shareholders? Explain. Old EPS Forward P/E $1.50 14 Assumed shares 100 Price per share Old equity New debt New earnings New equity New shares New EPS d. What is Yerba's forward P/E ratio after this transaction? Does the P/E ratio go up o New P/E Price/Earnings ratio Requirements 1. In cell D16, by using cell references, calculate the new debt/equity ratio (1 pt.). 2. In cell D17, by using cell references, calculate the market risk premium (1 pt.). 3. In cell D21, by using cell references, calculate the new beta (1 pt.). 4. In cell D25, by using cell references, calculate the new expected return on equity ( 5. In cell D34, by using cell references, calculate the price per share (1 pt.). 6. In cell D35, by using cell references, calculate the old equity (1 pt.). 7. In cell D36, by using cell references, calculate the new debt (1 pt.). 8. In cell D37, by using cell references, calculate the new earnings (1 pt.). 9. In cell D38, by using cell references, calculate the new equity (1 pt.). 10. In cell D39, by using cell references, calculate the new number of shares (1 pt.). 11. In cell D40, by using cell references, calculate the new earnings per share (1 pt.). 12. In cell D44, by using cell references, calculate the new price/earnings ratio (1 pt.). 13. To answer whether the price/earnings ratio rises or falls, you need to compare the price/earnings ratio to the forward price/earnings ratio. In cell D45, type either Fa the same, or Rises (1 pt.). has a beta of 1.2 and an expected return of 5% yield and repurchases 40% of its stock. nsaction? fter this transaction? ed earnings per share this coming year of $1.50, vided by the expected earnings for the coming after this transaction? Does this change benefit transaction? Does the P/E ratio go up or down? nsaction? fter this transaction? ed earnings per share this coming year of $1.50, vided by the expected earnings for the coming after this transaction? Does this change benefit transaction? Does the P/E ratio go up or down? ate the new debt/equity ratio (1 pt.). ate the market risk premium (1 pt.). ate the new beta (1 pt.). ate the new expected return on equity (1 pt.). ate the price per share (1 pt.). ate the old equity (1 pt.). ate the new debt (1 pt.). ate the new earnings (1 pt.). ate the new equity (1 pt.). ate the new number of shares (1 pt.). ate the new earnings per share (1 pt.). ate the new price/earnings ratio (1 pt.). ises or falls, you need to compare the new nings ratio. In cell D45, type either Falls, Stays Problem 15-7 Ten years have passed since Arnell issued $10 million in perpetual interest-only de 6% annual coupon. Tax rates have remained the same at 35% but interest rates hav Arnell's current cost of debt capital is 4%. a. so What is Arnell's annual interest tax shield? b. What is the present value of the interest tax shield today? Interest rate Tax rate Amount of debt Discount rate 6.00% 35% $10,000,000 4.00% a. What is Arnell's annual interest tax shield? Interest payment Annual interest tax shield b. What is the present value of the interest tax shield today? PV(interest tax shield) Requirements 1. In cell D15, by using cell references, calculate the annual interest payment (1 pt.). 2. In cell D16, by using cell references, calculate the annual interest tax shield (1 pt.) In cell D20, by using cell references, calculate the present value of the annual inte 3. shield (1 pt.). erpetual interest-only debt with a % but interest rates have dropped nterest payment (1 pt.). nterest tax shield (1 pt.). value of the annual interest tax Problem 16-19 Sarvon Systems has a debt-equity ratio of 1.2, an equity beta of 2.0, and a debt beta of 0. currently evaluating the following projects, none of which would change the firm's volat Project Investment (million) NPV (million) A B $100 $20 C $50 $6 $85 $10 a. Which project will equity holders agree to fund? b. What is the cost to the firm of the debt overhang? D/E Ratio b Equity b Debt 1.20 2.00 0.30 a. Which project will equity holders agree to fund? Cutoff Project Profitability index Equity funded? A B C b. What is the cost to the firm of the debt overhang? Opportunity cost (million) Requirements 1. In cell D19, by using cell references, find the ratio between the debt beta and equi equity ratio (1 pt.). 2. In cell D22, by using cell references, calculate the profitability index of project A ( cells E22:H22 (1 pt.). 3. To decide which project would be eligible for equity funding, you need to compar the cutoff measure by using the function IF. In cell D23, by using the function IF compare the profitability index of project A to the cutoff measure; if true, type "Ye D23 and paste it onto cells E23:H23 (1 pt.). 4. In cell E27, by using cell references, calculate the cost to the firm of the debt over .0, and a debt beta of 0.30. It is change the firm's volatility: D E $30 $15 D $75 $18 E n the debt beta and equity beta and multiply it by the debt-to- ility index of project A (1 pt.). Copy cell D22 and paste it onto ng, you need to compare the profitability index of each project to y using the function IF and absolute and relative cell references, easure; if true, type "Yes"; if false, type "No" (1 pt.). Copy cell he firm of the debt overhang (1 pt.). Problem 11-49 Consider a portfolio consisting of the following three stocks: HEC Corp Green Midget AliveAndWell Portfolio Weight 0.25 0.35 0.40 Volatility 12% 25% 13% The volatility of the market portfolio is 10% and it has an expected return of 8%. The ris a. Compute the beta and expected return of each stock. b. Using your answer from part a, calculate the expected return of the portfolio. c. What is the beta of the portfolio? d. Using your answer from part c, calculate the expected return of the portfolio and v to part b. Volatility of market portfolio Market expected return Risk-free rate 10% 8% 3% a. Compute the beta and expected return of each stock. Stock HEC Corp Green Midget AliveAndWell Beta E[R] b. Using your answer from part a, calculate the expected return of the portfolio. Expected return c. What is the beta of the portfolio? Beta d. Using your answer from part c, calculate the expected return of the portfolio and v to part b. Expected return Match? Requirements 1. In cell D24, by using relative and absolute cell references, calculate the beta for H 2. To calculate the betas for Green Midget and AliveAndWell, copy cell D24 and pas 3. In cell E24, by using relative and absolute cell references, calculate the expected r 4. To calculate the expected returns for Green Midget and AliveAndWell, copy cell E E25:E26 (1 pt.). 5. Calculate the expected return of the portfolio by using the function SUMPRODU function SUMPRODUCT and cell references, calculate the expected return of the 6. Calculate the beta of the portfolio by using the function SUMPRODUCT. In cell SUMPRODUCT and cell references, calculate the beta of the portfolio (1 pt.). 7. In cell D38, by using cell references, calculate the expected return of the portfolio 8. To verify that your answer for part (d) matches your answer for part (b), you need of the portfolio in part (d) with the expected return of the portfolio in part (b). In c pt.). e stocks: Correlation with Market Portfolio 0.4 0.6 0.5 as an expected return of 8%. The risk-free rate is 3%. stock. xpected return of the portfolio. xpected return of the portfolio and verify that it matches your answer stock. xpected return of the portfolio. xpected return of the portfolio and verify that it matches your answer l references, calculate the beta for HEC Corp (1 pt.). liveAndWell, copy cell D24 and paste it onto cells D25:D26 (1 pt.). references, calculate the expected return for HEC Corp (1 pt.). idget and AliveAndWell, copy cell E24 and paste it onto cells by using the function SUMPRODUCT. In cell D30, by using the , calculate the expected return of the portfolio (1 pt.). function SUMPRODUCT. In cell D34, by using the function e the beta of the portfolio (1 pt.). the expected return of the portfolio (1 pt.). s your answer for part (b), you need to compare the expected return eturn of the portfolio in part (b). In cell D39, type either Yes or No (1