finance assignment

User Generated

JbexUneq

Business Finance

Description

use formula sheet and show And show the calculation steps.

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Unformatted Attachment Preview

SAINT MARY’S UNIVERSITY SOBEY SCHOOL OF BUSINESS Department of Finance, Information Systems and Management Science Business Finance II FINA3361 Formula Set Formulas from FINA2360 you may find helpful: PV = FVt (1 + r )t PV = C r PV = C r-g 1 é ê1 - 1 + r t ( ) PV = C ê ê r ê ë ù ú ú ú ú û é (1 + r )t - 1 ù FVt = C ê ú r êë úû 123 - 1 − 0 124 5 𝐶 1+𝑔 𝑃𝑉 = (1 − * , . = 𝐶/ 6 𝑟−𝑔 1+𝑟 𝑟−𝑔 m é APR ù EAR = ê1 + -1 m úû ë EAR = e APR - 1 m é APR ù f EPR = ê1 + -1 m úû ë ?@AB@ 𝐶+ 𝑌𝑇𝑀:;;4
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Explanation & Answer

Find the solution for Problem 1-3 attached herewith, so yo can submit the assignment.. Will finish 4 & 5 and upload them in sometime..

(WE) = Weight of Equity
(WD)= Weight of Debt
(VU)= Value of Unlevered Firm
(VL) = Value of Levered Firm
(RE)= Cost of Equity
(RD)= Cost of Debt
(RU)= Cost of Unlevered Equity

Answer 1
(RU) = 13.5%,
VU

VL

EBIT = 149,000,

=

EBIT (1-Tax) / RU

=

149,000 (1 – 35%) / 13.5%

=

96,850 / 13.5%

=

$717,407

=

VU+ (Debt)(Tax Rate)

=

717,407 + (265,000 x 35%)

=

717,407 + 92,750

=

810,157

Equity =

RE

(RD) = 9%,

Tax rate (t) = 35%

VL

-

Debt

=

810,157

-

265,000

=

545,157

=

RU + (RU – RD) x (D/E) x (1 – T)

=

13.5% + (13.5% - 9%) x (265,000 / 545,157) x (1 – 35%)

=

13.5% + (4.5% x 0.486 x 0.65)

=

13.5% + 1.42%

=

...


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