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Date Posted: 10:47:00 05/01/01 Tue
Author: Gabe Jonas
Subject: Solutions for Another Sample Final

TF
1T
2T
3T
4T
5T
SA
1 put owner long potential bondholders short firm value
call producer long consumers short revenues
call producer long consumers short increased revenues
MC
1C
2A
3C
SA
2 Set-of-Contracts view of the company as a set of obligations among its explicit & implicit stakeholders.
3 Moral Hazard - actions taken by the agent that are unseen & give personal benefit but maybe costly to principal
MC
4A
5E
6B
7B
SA
4 not on test
5 Minimize WACC & Maximize Firm Value
TF
6F
7F
SA
6 Declaration date 5/5/99
Ex-Dividend date 5/12/99
Record date 5/15/99
Payment date 5/30/99
Problems
1 leverage 23.22%
cost of debt 6.88%
cost of R.E. DCF 18.72%
cost of R.E. WACC 15.97%
2 ER EE Combined
stck price 50 60 50
# shares 10,000,000 7,000,000 18,400,000
NI 20,000,000 42,000,000 62,000,000
P/E 25 10 14.8
EPS 2 6 3.37
MC 500,000,000 420,000,000 920,000,000
4 .9386
5 a 10.63%
b 4000
c 10.63%
d $6.37 (425/66.67) or .1063=D/60 + 0
e 10.63%

3 a 31.5
b 16.22%
c 38.5

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