Sensitivity Analysis for Target Consolidated WACC Sensitivity to: Explain how different capital structure and risk free interest rates affect the cost of Capital? What happens when leverage increases? What is the impact on cost of capital when the cost of debt decreases and why? 8.496 3096 4096 5096 6598 7096 7596 8096 4.00% 8.0496 7.9196 7.7996 7.6496 7.6096 7.5596 7.5196 D/E DIE 30-Year T-Bond 4.5096 8.5096 8.3596 8.2296 8.0696 8.0196 7.9796 7.9396 4.2596 8.2796 8.1396 8.0196 7.8596 7.8096 7.7696 7.7296 4.7596 8.7296 8.5796 8.4496 8.2796 8.2296 8.1896 8.1396 5.0096 8.9596 8.7996 8.6696 8.4896 8.4396 8.3896 8.3496 WACC Sensitivity to: Explain how different capital structures and risk profile affect the cost of Capital? What happens when credit quality increases or decreases? Would a lower credit risk grade increase or decrease the overall cost of capital? 8.496 1.1095 8.8696 8.6996 8.5496 8.3495 8.2996 8.2396 8.1896 3096 4096 5096 6599 7096 7596 8096 Consolidated Spread on T-Bond - 1.2096 1.3096 8.8896 8.89% 8.7096 8.7296 8.5696 8.5896 8.3796 8.3996 8.3196 8.3496 8.2696 8.2898 8.2196 8.2496 1.4096 8.9096 8.7496 8.6096 8.4196 8.3696 8.3196 8.2696 D/E 1.5096 8.9296 8.7696 8.6296 8.4496 8.3996 8.3495 8.2996 Cost of Equity Sensitivity to: Explain how different capital structures and Asset Betas affect the cost of Equity? What happens when the beta of the consolidated entity increases or decreases? What does a higher beta mean and what is the effect on the hurdle rate for different projects? 11.696 3096 4096 5096 6595 7096 7596 80% Asset (Unlevered) Beta 0.85 0.90 10.0096 10.2996 10.2596 10.5696 10.5196 10.8396 10.8996 11.2496 11.0296 11.3796 11.1496 11.5196 11.2796 11.6496 0.80 9.7096 9.9496 10.1896 10.5496 10.6696 10.7896 10.90% 0.95 10.5996 10.8796 11.1696 11.5896 11.7396 11.8796 12.0196 DIE 1.00 10.8896 11.1896 11.4896 11.9396 12.0896 12.2396 12.3896 Sensitivity Analysis for Target Consolidated WACC Sensitivity to: Explain how different capital structure and risk free interest rates affect the cost of Capital? What happens when leverage increases? What is the impact on cost of capital when the cost of debt decreases and why? 8.496 3096 4096 5096 6598 7096 7596 8096 4.00% 8.0496 7.9196 7.7996 7.6496 7.6096 7.5596 7.5196 D/E DIE 30-Year T-Bond 4.5096 8.5096 8.3596 8.2296 8.0696 8.0196 7.9796 7.9396 4.2596 8.2796 8.1396 8.0196 7.8596 7.8096 7.7696 7.7296 4.7596 8.7296 8.5796 8.4496 8.2796 8.2296 8.1896 8.1396 5.0096 8.9596 8.7996 8.6696 8.4896 8.4396 8.3896 8.3496 WACC Sensitivity to: Explain how different capital structures and risk profile affect the cost of Capital? What happens when credit quality increases or decreases? Would a lower credit risk grade increase or decrease the overall cost of capital? 8.496 1.1095 8.8696 8.6996 8.5496 8.3495 8.2996 8.2396 8.1896 3096 4096 5096 6599 7096 7596 8096 Consolidated Spread on T-Bond - 1.2096 1.3096 8.8896 8.89% 8.7096 8.7296 8.5696 8.5896 8.3796 8.3996 8.3196 8.3496 8.2696 8.2898 8.2196 8.2496 1.4096 8.9096 8.7496 8.6096 8.4196 8.3696 8.3196 8.2696 D/E 1.5096 8.9296 8.7696 8.6296 8.4496 8.3996 8.3495 8.2996 Cost of Equity Sensitivity to: Explain how different capital structures and Asset Betas affect the cost of Equity? What happens when the beta of the consolidated entity increases or decreases? What does a higher beta mean and what is the effect on the hurdle rate for different projects? 11.696 3096 4096 5096 6595 7096 7596 80% Asset (Unlevered) Beta 0.85 0.90 10.0096 10.2996 10.2596 10.5696 10.5196 10.8396 10.8996 11.2496 11.0296 11.3796 11.1496 11.5196 11.2796 11.6496 0.80 9.7096 9.9496 10.1896 10.5496 10.6696 10.7896 10.90% 0.95 10.5996 10.8796 11.1696 11.5896 11.7396 11.8796 12.0196 DIE 1.00 10.8896 11.1896 11.4896 11.9396 12.0896 12.2396 12.3896