This needs to be done in Excel please.
PROBLEM 14-11 BASED ON CHAPTER 14: WACC AND MODIGLIANI & MILLER EXTENSION MODELS WITH GROWTH ASSUMPTIONS
Consider the entrepreneur described in Section 14.1 (and referenced in Tables 14.1–14.3). Suppose she funds the project by borrowing $750 rather than $500.
TABLE 14.1 The Project Cash Flows
|
Date 0 |
Date 1 |
|
|
|
Strong Economy |
Weak Economy |
|
−$800 |
$1400 |
$900 |
TABLE 14.2 Cash Flows and Returns for Unlevered Equity
|
Date 0 |
Date 1: Cash Flows |
Date 1: Returns |
|||
|
|
Initial Value |
Strong Economy |
Weak Economy |
Strong Economy |
Weak Economy |
|
|
|||||
|
Unlevered equity |
$1000 |
$1400 |
$900 |
40% |
−10% |
TABLE 14.3 Values and Cash Flows for Debt and Equity of the Levered Firm
|
|
Date 0 |
Date 1: Cash Flows |
|
|
|
Initial Value |
Strong Economy |
Weak Economy |
|
Debt Levered equity |
$500 E = ? |
$525 $875 |
$525 $375 |
|
Firm |
$1000 |
$1400 |
$900 |
a. According to MM Proposition I, what is the value of the equity? What are its cash flows if the economy is strong? What are its cash flows if the economy is weak?
b. What is the return of the equity in each case? What is its expected return?
c. What is the risk premium of equity in each case? What is the sensitivity of the levered equity return to systematic risk? How does its sensitivity compare to that of unlevered equity? How does its risk premium compare to that of unlevered equity?
d. What is the debt-equity ratio of the firm in this case?
e. What is the firm’s WACC in this case?
PROBLEM 14-18 BASED ON CHAPTER 14: WACC AND MODIGLIANI & MILLER EXTENSION MODELS WITH GROWTH ASSUMPTIONS
In mid-2012, AOL Inc. had $100 million in debt, total equity capitalization of $3.1 billion, and an equity beta of 0.90 (as reported on Yahoo! Finance). Included in AOL’s assets was $1.5 billion in cash and risk-free securities. Assume that the risk-free rate of interest is 3% and the market risk premium is 4%.
a. What is AOL’s enterprise value?
b. What is the beta of AOL’s business assets?
c. What is AOL’s WACC?
Try it now!
How it works?
Follow these simple steps to get your paper done
Place your order
Fill in the order form and provide all details of your assignment.
Proceed with the payment
Choose the payment system that suits you most.
Receive the final file
Once your paper is ready, we will email it to you.
Our Services
Custom Writings Help is a Quality-Oriented Company in Online Writing as a result of hiring exceptional professionals to execute clients' tasks.
Essays
At Custom Writings Help,We understand the struggle of research paper writing, and that is why at Custom WritingS Help, we are all out to help you. We pride ourselves on having a team of clinical writers. The stringent and rigorous vetting process ensures that only the 'BEST' Writers are chosen for the job. We have highly qualified Ph.D. and MA writers working with us; we equally offer these experienced writers specific bonuses and incentives to make them deliver highly original, unique, and informative content at reasonably low prices.
Admissions
Thesis Writing Service
Worlwide, Many Masters Students are struggling with Thesis Completion. A thesis is likely to be the longest and most challenging piece of work a student has ever completed. However, unlike essays and other assignments, a student can pick a particular interest topic and work on their initiative. Fortunately, we are there for you. At Custom Writings Help, you are assured of an authentic, imaginative, informative, linguistically great, and advantageous thesis that adheres to all your needs. So, why continue considering different writers when you have discovered the best in the field?
Editing
Custom Papers
Not a single student can avoid writing custom papers. However, a total lack of experience, skills, and time makes it very hard to produce a superb writing piece. Therefore, if you are seeking professional help, turn to us. Our specialized and experienced writers compose a variety of model papers, including custom essays, college term papers, research papers, book reports, MBA essays, executive summaries, dissertations, Ph.D. theses, admission essays, and research proposals for college and university students at any level.
Coursework
Essay Writing
Most of the students disregard the critical principles of essay writing and compose papers below sensible guidelines. Therefore, with Custom Writings Help, one should not worry about his/her essay. Our Writers compose informative and engaging content on all complexities and topics. We write meaningful and smart essays while prioritizing all aspects that bring about a good grade, such as impeccable grammar, proper structure, zero-plagiarism, and conformance to guidelines.
Coursework
Coourse Work Writing
Don't let the seemingly never-ending onslaught of writing assignments get you down. If you are looking where to get course work assistance online, the writers at Custom Writings Help are here to assist you with all of your writing needs. We undertake to unique delivery of papers that meet the professor's requirements. The content is proofread, edited, and checked plagiarism before submission to customers. No matter how big or small your work is, we will deliver on time. Try US Now! !
Coursework
Dissertation Writing Service
High-Quality Dissertation Writing Services are rare. They require Ph.D. academicians – not easily found. However, are an exception. The years, time, and resources we have invested in the dissertation world has given us a competitive advantage over others. Choose to come to Custom Writings Help; You will find perfect Ph.D. consultants who have written hundreds of dissertations theses ready to help you. Let our dissertation-writing services help you craft your dissertation, for you are assured we will give you the results.