Questions Set 65:

Solution

Part I:
Calculate your company’s Weighted Average Cost of Capital in Practice Year 2. In calculating cost of equity, use the CAPM. In the CAPM, use 6.0% for the risk free rate, 5.0% for the market risk premium, and assume your company is rated average in terms of financial risk, in the prime of its life cycle. Select an appropriate beta (hint: what beta reflects average risk).
Part II:
Calculate your company’s Economic Value-Added (EVA) for Practice Year 2.
Part III:
Calculate your company’s Market Value-Added (MVA) for Practice Year 2.
Part IV:
Suppose that the beta value you used in the previous parts is really an unlevered beta. Calculate the beta value that is consistent with your actual leverage.

Data:

ROS 9.35%
Asset Turnover 1.06
ROA 9.93%
Leverage 1.64
ROE 16.27%
Emergency Loans $0
Sales $4,24,21,733
Variable Costs $2,88,00,153
SGA $36,67,172
EBIT $76,01,619
Profit $39,65,153
Cumulative Profit $85,51,212
Stock price $16.42
Market Capitalization $4,05,96,232
SandP Rating BBB
Working Capital $81,44,544
Days of Working Capital 70.1
Free Cash Flow ($18,99,940)
Plant and Equipment $3,30,00,000
Total Assets $3,99,14,420
Plant Utilization 91.76%
Low End Tech Segment Share 12.29%
High End Tech Segment Share 14.63%
Overall Market Share 13.08%
Complement 191
Overtime 0.00%
Turnover Rate 10.01%
Productivity Index 100.00%
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One Response to “Questions Set 65:”

  1. Mr WordPress Says:

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