WACC and Optimal Capital Structure

F. Pierce Products Inc. is considering changing its capital structure. F. Pierce currently has no debt and no preferred stock, but it would like to add some debt to take advantage of low interest rates and the tax shield. Its investment banker has indicated that the pre-tax cost of debt under various possible capital structures would be as follows:

F. Pierce uses the CAPM to estimate its cost of common equity, r_s and at the time of the analaysis the risk-free rate is 7%, the market risk premium is 6%, and the company's tax rate is 30%. F. Pierce estimates that its beta now (which is "unlevered" because it currently has no debt) is 1.4. Based on this information, what is the firm's optimal capital structure, and what would be the weighted average cost of capital at the optimal capital structure? Do not round intermediate calculations. Round your answers to two decimal places.

Treynor Pie Company is a food company specializing in high-calorie snack foods. It is seeking to diversify its food business and lower its risks. It is examining three companies—a gourmet restaurant chain, a baby food company, and a nutritional products firm. Each of these companies can be bought at the same multiple of earnings. The following represents information about all the companies. Company Correlation with Treynor Pie Company Sales ($ millions) Expected Earnings ($ millions) Standard Deviation in Earnings ($ millions) Treynor PieCompany + 1.0 $ 104 $ 8 $ 2.0 Gourmet restaurant + .7 64 8 1.5 Baby food company + .2 52 5 1.7 Nutritionalproducts company − .8 74 7 3.2 a-1. Compute the coefficient of variation for each of the four companies. (Enter your answers in millions (e.g., $100,000 should be entered as ".10"). Round your answers to 3 decimal places.) a-2. Which company is the least risky? Nutritional products company Gourmet restaurant Baby food company Treynor Pie Company a-3. Which company is the most risky? Nutritional products company Treynor Pie Company Baby food company Gourmet restaurant b. Which of the acquisition candidates is most likely to reduce Treynor Pie Company's risk? Nutritional products company Gourmet restaurant Baby food company

Snavely, Inc., manufactures and sells two products: Product E1 and Product A7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below:

The direct labor rate is $21.10 per DLH. The direct materials cost per unit for each product is given below:

The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity:

The total overhead applied to Product E1 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.)

rev: 03_25_2018_QC_CS-119201

Multiple Choice

• $1,214,465

• $608,732

• $523,169

• $436,128

On December 8, 2015, ABC store announced they were buying 123 Co for $13.9 billion. The deal was for $92 per share, a 78% premium to 123 CO.December 4 closing price of $51.70 per share.Summary financial data for 123 Co before the deal is shown below (equity shown is Book Value). the company’s equity beta before the buyout proposal is 1.0, the same level as the overall market.ABC store announced that they would operate 123 Co similarly to their other brands, with a 40% debt:capital ratio (D/(D+E). Because of their size and diversification, ABC store expected to reduce 123 Co borrowing cost by 1%, and to lower the tax rate to 30%.Question Calculate 123 Co weighted average cost of capital before the acquisition (using book value weights) and after the acquisition using the new proposed capital structure weights of 40% debt:capital. SHOW ALL STEPS IN YOUR CALCULATIONS In a couple sentences, explain your results.

sales $4585 mill ; net income $495 mill; long term interest expense 33.7 mill; long term debt 410 mill; equity $3,550 mill; tax rate 35%; dividend yeild 2.10%; stock price 52 week high/low = $139.70/$45.30; Risk free rate Rf 2.0%; Rm-Rf spread 6%

(MATLAB ONLY) (MATLAB ONLY) (MATLAB ONLY) (MATLAB ONLY) (MATLAB ONLY) (MATLAB ONLY)

Please complete the following Question in MATLAB ASAP, Thanks. :)

2a. Write a function that outputs the amount of freezing point depression (in degrees C) given a mass of magnesium chloride salt and a volume of water. Formula to calculate freezing point depression: ΔT = iKm in which ΔT is the change in temperature in °C, i is the van't Hoff factor, which = 3 for MgCl2 because it dissociates into three ions, one Mg+2 and two Cl- , K is a constant that equals 1.86 °C kg/mol and m is the molality of the solute in mol/kg. Other useful information so you don’t have to look it up: Moles of MgCl2 = (mass MgCl2)/((atomic mass Mg)+2*(atomic mass Cl)) Atomic mass Mg = 24.31 Atomic mass Cl = 35.45 Assume the density of water is 1.0 g/mL

2b. Use your function to calculate the depression for 100g MgCl2 dissolved in 500mL water

2c. Use your function to calculate the depression for 220g MgCl2 dissolved in 1L water

2d. Make a plot that shows the mass of MgCl2 necessary to depress the freezing point of a given volume (range: 1L - 100L) water by 1 degree Celsius. Give your plot appropriate labels and a title.

Smoky Mountain Corporation makes two types of hiking boots—the Xtreme and the Pathfinder. Data concerning these two product lines appear below:

The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below:

Compute the product margins for the Xtreme and the Pathfinder products under the activity-based costing system.

3. Prepare a quantitative comparison of the traditional and activity-based cost assignments.

Suppose the inflation rate is expected to be 6% next year, 4% the following year, and 2.15% thereafter. Assume that the real risk-free rate, r*, will remain at 2.45% and that maturity risk premiums on Treasury securities rise from zero on very short-term bonds (those that mature in a few days) to 0.2% for 1-year securities. Furthermore, maturity risk premiums increase 0.2% for each year to maturity, up to a limit of 1.0% on 5-year or longer-term T-bonds.

1. Calculate the interest rate on 1-year Treasury securities. Round your answer to two decimal places.
   
   ________ %

Calculate the interest rate on 2-year Treasury securities. Round your answer to two decimal places.

________ %

Calculate the interest rate on 3-year Treasury securities. Round your answer to two decimal places.

________ %

Calculate the interest rate on 4-year Treasury securities. Round your answer to two decimal places.

________ %

Calculate the interest rate on 5-year Treasury securities. Round your answer to two decimal places.

________ %

Calculate the interest rate on 10-year Treasury securities. Round your answer to two decimal places.

________ %

Calculate the interest rate on 20-year Treasury securities. Round your answer to two decimal places.

________ %

Select the correct yield curve based on these data.

Treynor Pie Company is a food company specializing in high-calorie snack foods. It is seeking to diversify its food business and lower its risks. It is examining three companies—a gourmet restaurant chain, a baby food company, and a nutritional products firm. Each of these companies can be bought at the same multiple of earnings. The following represents information about all the companies.
  

a-1. Compute the coefficient of variation for each of the four companies. (Enter your answers in millions (e.g., $100,000 should be entered as ".10"). Round your answers to 3 decimal places.)
  

a-2. Which company is the least risky?
  

a-3. Which company is the most risky?
  

b. Which of the acquisition candidates is most likely to reduce Treynor Pie Company's risk?
  

Given that Sale[NUM_ROW][NUM_COLUMN] is a two dimensional array of float-

point type and the two constants are defined as follows:

#define NUM_ROW 4

#define NUM_COLUMN 4

float Value[NUM_ROW][NUM_COLUMN] =

{

2.1, 2.2, 2.3, 2.4, 1.5, 1.6, 1.7, 1.8, 1.9, 2.0, 2.1, 2.2, 2.1, 2.2, 2.3, 2.4

};

Write a C++ main function that computes and prints out the following information about

this 2d array:

(1) The mean of all the Value[][] array elements (0.5 points).

(2) The median of all the Value[][] array elements (0.5 points)

(3) The local average values of all the array elements (1.0 points). For instance, the

local average value at position i, j = (Value[i-1][j]+Value[i+1][j]+Value[i][j+1]+Value[i][j-1]+Value[i][j])/5.

If (i+1) > NUM_ROW-1 or (i-1) < 0, use modulus operator to wrap around to the other end of the array index.

Create another array: Average[NUM_ROW][NUM_COLUMN], and use this array to store the values

of local average at each position of this 2d array. At the end, you need print out

the values of all the array elements of Average[][] on computer screen.

Parts (2) only please.