You are the Founder and CEO of STYLE, a women's shoes, handbags and belts company. You design your own products and sell a) Wholesale to department stores and b) Directly to consumers over the internet. You operate profitably for over three years having financed your company with friends and family and your own capital. You are looking to ramp up production, streamline the supply of raw materials and engage into a profit sharing/co-marketing agreement with Internet Direct - to - Consumer platforms such as Amazon, Shopify, etc. You estimate that you need to raise a minimum of $5.0 million to realize your immediate growth plan. Your last year financial results are as follows: ASSETS $2.2 M Designs (600,000), Equipment (400,000), Operating Long-Term Leases (400,000) Inventory ($300,000), Receivables ($250,000), Cash ($50,000), Goodwill (200,000) LIABILITIES Private Loan (250,000), Payables (50,000) EQUITY $1.9 M SALES $2.25 M, COST OF GOODS SOLD $750,000, SGA $500,000 EBITDA $1.0 M Interest $15,000 Depreciation 35,000 TAXES $250,000 NET INCOME (Earnings) $700,000 Assume that you actually structure a deal to sell 60% of the company to an SME Private Equity Fund for $1.5 M. The Fund is agreeing to retain you as the CEO on the condition that you agree to pay them an annual common dividend of $150,000 and take on $500,000 of additional debt structured as follows: 5yr Bank Loan up to 2x Next Years EBITDA at a rate of 5.0% Remaining in a 5yr subordinated debt issued by the PE fund at a rate of 8.0%

g) What would be your return on equity (ROE) upon selling a 60% stake in the company?

h) Calculate the WACC for the company Assume corporate tax of 25%

i) What is the likely ROE of the new majority owner one year after taking control of the company?

j) Calculate Leverage Ratio (Debt/Equity), Debt-to-EBITDA and Interest Coverage ratios of the company one year after the transaction is consummated.