代写125810- Final Exam Format代做回归

125810- Final Exam Format

Time allowed: 2 hours

7 Questions in total, including:

a) 3 Short answer questions that require some simple calculation and explanation - Total 45 marks (general topics that we cover in class)

b) 3 Short answer questions that require some simple calculation and explanation - Total 40 marks (based on the case study: Globalizing the Cost of Capital and Capital Budgeting at   AES)- the AES case can be found in the link:https://hbsp.harvard.edu/import/1228389

d) 1 Long calculation question – Total 15 marks

-     Topic: Estimating beta, cost of capital, firm value, recapitalization, capital structure

*Note: The order of the questions will be shuffled.

Sample questions:

a) Short answer questions that require some simple calculation and explanation

You are analyzing Contigo’s, an upscale retailer, and find that the regression estimate of the firm’sbeta is 0.75; the standard error for the beta estimate is 0.50. You also note that the average unlevered beta of comparable specialty retailing firms is 1.15.

a. If Contigo’s has a debt/equity ratio of 20 percent, estimate the beta for the company based on comparable firms. (The tax rate is 40 percent)

b. Estimate a range for the beta from the regression.

c. How would you reconcile the two estimates? Which one would you use in your analysis?

b) Case study based Short answer/explanation questions (please note that this sample question based on the case Nike, in the exam you will be asked the question based on the AES case)

a. Explain why Cohen’s estimation of the cost of debt is incorrect.

b. Reestimate Nike’s cost of debt. Please explain carefully and provide the justification for your estimation.

c. What mistakes did Cohen make in estimating the weight of debt and the weight of equity in calculating Nike’s WACC? Reestimate the weights. Please explain carefully and provide the justification for your estimation.

c) Long calculation question

Novell, which had a market value of equity of $2 billion and a beta of 1.50, announced that it was acquiring WordPerfect, which had a market value of equity of $1 billion and a beta of 1.30.

Before the acquisition, Novell’s Debt to Equity Ratio (D/E) was 10 percent while WordPerfect’s Debt to Equity Ratio (D/E) was 3 percent. The corporate tax rate was 40 percent.

a. Calculate the unlevered betas for both firms before the acquisition

b. Calculate the unlevered beta for Novell after the acquisition.

c. Calculate the levered beta for Novell after the acquisition, assuming that the entire acquisition was financed with equity and that Novell assumed WordPerfect’s debt.