Beckman Engineering and Associates (BEA) is considering a change in its capital structure. BEA currently has $20 million in debt carrying a rate of 6%, and its stock price is $40 per share with 2 million shares outstanding. BEA is a zero growth firm and pays out all of its earnings as dividends. The firm's EBIT is $12.427 million, and it faces a 35% federal-plus-state tax rate. The market risk premium is 6%, and the risk-free rate is 6%. BEA is considering increasing its debt level to a capital structure with 45% debt, based on market values, and repurchasing shares with the extra money that it borrows. BEA will have to retire the old debt in order to issue new debt, and the rate on the new debt will be 12%. BEA has a beta of 1.0.

1. What is BEA's unlevered beta? Use market value D/S (which is the same as w_d/w_s) when unlevering. Round your answer to two decimal places.
   
   
2. What are BEA's new beta and cost of equity if it has 45% debt? Do not round intermediate calculations. Round your answers to two decimal places.

   Beta
   Cost of equity	%

   
   
3. What are BEA’s WACC and total value of the firm with 45% debt? Do not round intermediate calculations. Round your answer to two decimal places.
   %
   
   What is the total value of the firm with 45% debt? Do not round intermediate calculations. Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to three decimal places.
   $ million

Sunrise, Inc., has no debt outstanding and a total market value of $395,600. Earnings before interest and taxes, EBIT, are projected to be $53,000 if economic conditions are normal. If there is strong expansion in the economy, then EBIT will be 13 percent higher. If there is a recession, then EBIT will be 22 percent lower. The company is considering a $195,000 debt issue with an interest rate of 8 percent. The proceeds will be used to repurchase shares of stock. There are currently 8,600 shares outstanding. The company has a tax rate of 21 percent, a market-to-book ratio of 1.0, and the stock price remains constant.

a-1. Calculate earnings per share (EPS) under each of the three economic scenarios before any debt is issued. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

a-2. Calculate the percentage changes in EPS when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

b-1. Calculate earnings per share (EPS) under each of the three economic scenarios assuming the company goes through with recapitalization. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

b-2. Given the recapitalization, calculate the percentage changes in EPS when the economy expands or enters a recession. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Question 2

Enzymes basically work by...

Anaerobic glycolysis yields a net gain of...

After a few minutes of easy jogging at a submaximal intensity, my oxygen consumption and heart rate reach a plateau and stay at that level for 20 to 30 minutes as I am jogging. With regards to oxygen consumption this would be an example of ...

Question 17

The RQ measured for a subject who has been jogging easily at 70% VO2max for about 40 minutes and is in a steady state will likely be?

Question 57

A person exercises in their “fat burning zone” for 4 hours at 35% VO₂peak. The O₂ cost of exercise at that work rate is 0.5L/minute. Following exercise the subject rewards himself with an ice-cream sundae (700kcal). The following statement is true(assume 5kcal/lit of O₂):

MERGER ANALYSIS Apilado Appliance Corporation is considering a merger with the Vaccaro Vacuum Company. Vaccaro is a publicly traded company, and its current beta is 1.30. Vaccaro has been barely profitable, so it has paid an average of only 20% in taxes during the last several years. In addition, it uses little debt, having a debt ratio of just 25%. If the acquisition were made, Apilado would operate Vaccaro as a separate, wholly owned subsidiary. Apilado would pay taxes on a consolidated basis, and the tax rate would therefore increase to 35%. Apilado also would increase the debt capitalization in the Vaccaro subsidiary to 40% of assets, which would increase its beta to 1.47. Apilado’s acquisition department estimates that Vaccaro, if acquired, would produce the following cash flows to Apilado’s shareholders (in millions of dollars):

Year 1 2 3 4 5 and beyond

Cash Flows $1.30 1.50 1.75 2.00 Constant growth at 6%

These cash flows include all acquisition effects. Apilado’s cost of equity is 14%, its beta is 1.0, and its cost of debt is 10%. The risk-free rate is 8%.

a. What discount rate should be used to discount the estimated cash flows? (Hint: Use Apilado’s rs to determine the market risk premium.)

b. What is the dollar value of Vaccaro to Apilado?

c. Vaccaro has 1.2 million common shares outstanding. What is the maximum price per share that Apilado should offer for Vaccaro? If the tender offer is accepted at this price, what will happen to Apilado’s stock price?

Assume you have just been hired as business manager of PizzaPalace, a pizza restaurant located adjacent to campus. The company's EBIT was $500,000 last year, and since the university's enrollment is capped, EBIT is expected to remain constant over time. Since no expansion capital will be required, PizzaPalace plans to pay out all earnings as dividends. The management group owns about 50% of the stock, and the stock is traded in the OTC market. The firm is currently financed with all equity; it has 100,000 shares outstanding; and P0 = $25 per share. When you took your MBA Financial Analysis course, your instructor stated that most firms' owners would be financially better off if the firms used some debt. When you suggested this to your new boss, he encouraged you to pursue the idea. As a first step, assume that you obtained from the firm's investment banker the following estimated costs of debt for the firm at different capital structures: % Debt Ratio rd 0% --- 20 8.0% 30 8.5 40 9.0 50 9.5 If the company were to recapitalize, debt would be issued, and the funds received would be used to repurchase stock. PizzaPalace is in the 40% state-plus-federal corporate tax bracket, its beta is 1.0 when debt ratio is 0%, the risk-free rate is 6%, and the market risk premium is 6%.

a. For each capital structure under consideration, calculate the WACC.

b. Now calculate the corporate value, the value of the debt that will be issued, and the resulting market value of equity.

T/F

The variance of an asset's return can be less than the standard deviation of that asset's return.

If an investor owns two stocks, one whose standard deviation is 0.21 and the other whose standard deviation is 0.10, the required return will be higher for the stock with the higher standard deviation.

Different investors have different degrees of risk aversion, and the result is that investors with greater risk aversion tend to hold securities with lower risk (and therefore a lower expected return) than investors who have more tolerance for risk.

A stock's beta measures its diversifiable risk relative to the diversifiable risks of other firms.

A stock's beta is more relevant as a measure of risk to an investor who holds a well-diversified portfolio.

Portfolio A has one security, while Portfolio B has 100 securities. Portfolio A can be less risky.

Portfolio A has only one stock, while Portfolio B consists of all stocks that trade in the market, each held in proportion to its market value. Because of its diversification, Portfolio B will by definition be riskless.

A portfolio's risk is measured by the weighted average of the standard deviations of the securities in the portfolio.

Even if the correlation between the returns on two securities is +1.0, if the securities are combined in the correct proportions, the resulting 2-asset portfolio will have less risk than either security held alone.

Bad managerial judgments or unforeseen negative events that happen to a firm are defined as "company-specific," or "unsystematic," events, and in theory, their effects on investment risk cannot be diversified away.

Rita is a 105 pound 19 year-old college student who, as part of a sorority hazing ritual, attempted to drink 2 gallons of water over a 1 hour period. She made it through 1.5 gallons before she began vomiting, became disoriented, and started slurring her speech. Others at the party didn’t think much of her behaviors, until she collapsed and began having seizures. 911 was called and she was rushed to the hospital. In the emergency room, Rita was semi-comatose, responding only to painful stimuli. Her vital signs were stable, and a review of other systems noted no abnormalities. Blood and urine labs were ordered, with the following results:

Na+: 109 mEq/L K+: 4.0 mEq/L Chloride: 88 mEq/L CO2: 20 mEq/L Blood urea nitrogen (BUN): 9 mg/dL Creatinine: 1.0 mg/dL Glucose: 105 mg/dL Serum osmolality: 229 mOsm/kg H2O Urine osmolality: 80 mOsm/kg H2OQuestions (1 point each)1. List Rita’s abnormal lab values, along with their normal ranges

.2. What 2 conditions is Rita simultaneously suffering from?

3. What lab values support these diagnoses?

4. This condition can cause brain damage secondary to cerebral edema. Explain, in detail, the mechanism by which cerebral edema occurs in the setting of these diagnoses.

5. What will the treatment be for this patient?

You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: Stock Investment Stock's Beta Coefficient A $160 million 0.4 B 120 million 1.6 C 80 million 1.8 D 80 million 1.0 E 60 million 1.6

Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 6%, and you believe the following probability distribution for future market returns is realistic: Probability Market Return 0.1 -29% 0.2 0 0.4 13 0.2 28 0.1 49

What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.) ri = 9.7% + (6.8%)bi ri = 9.7% + (7.1%)bi ri = 6.0% + (6.8%)bi ri = 9.8% + (7.0%)bi ri = 6.0% + (7.1%)bi

Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places. % Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the stock is $50 million, it has an expected return of 14%, and its estimated beta is 1.4. Should Kish invest in the new company? The new stock be purchased.

At what expected rate of return should Kish be indifferent to purchasing the stock? Round your answer to two decimal places. %

You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five stocks: Stock Investment Stock's Beta Coefficient A $160 million 0.8 B 120 million 1.5 C 80 million 2.2 D 80 million 1.0 E 60 million 1.5 Kish's beta coefficient can be found as a weighted average of its stocks' betas. The risk-free rate is 6%, and you believe th

following probability distribution for future market returns is realistic: Probability Market Return 0.1 -29 % 0.2 0 0.4 13 0.2 28 0.1 55 What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market return.) ri = 6.0% + (6.7%)bi ri = 3.9% + (7.4%)bi ri = 3.9% + (6.7%)bi ri = 6.0% + (7.4%)bi ri = 7.3% + (8.6%)bi Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer to two decimal places. % Suppose Rick Kish, the president, receives a proposal from a company seeking new capital. The amount needed to take a position in the stock is $50 million, it has an expected return of 15%, and its estimated beta is 1.4. Should Kish invest in the new company? The new stock be purchased. At what expected rate of return should Kish be indifferent to purchasing the stock? Round your answer to two decimal places. %

In a recent survey concerning company sales and net earnings, 15 companies responded with the following information.

a) Using a statistical computing tool, find the equation of the regression line.
For full marks your answer should be accurate to at least three decimal places.

ŷ = ? + ?x

b) Use the regression line from part a to estimate the net earnings for a company with sales of $54.8 thousand.
For full marks your answer should be accurate to at least one decimal place.

Earnings: ?