1. Compute the WACC for A.A.T. Bass & Co. using the information below:

Book value of bonds = $800 million Maturity date = February, 2028 Equity beta = 1.30 Shares outstanding = 380 million

Tax rate = 35% Market price of bonds = 95.75% Coupon rate on bonds = 7.0% Book value of equity = $115 million

Price of common stock = $21.67 Yield on 10-year Treasury notes (Rf) = 2.0% Expected return on Market Portfolio (Rm) = 9.0%

2. Compute the asset beta for A.A.T. Bass & Co. using market values for debt and equity.

3. You are given the following information about the market portfolio: Expected return = 9%; standard deviation of returns = 15%; beta = 1.0; P/E ratio = 16 And you are given the following information about Bobs Barrel Co.: Standard deviation of returns = 24%; P/E ratio = 11; beta = 0.88; div yield = 2.5% Assume the risk free rate is 1.5% and the corporate tax rate is 36%.

a) Compute the required return on Bobs equity

b) Compute the correlation between Bobs equity and the market portfolio

4. Heavy Metal Corporation is expected to generate Free Cash Flow of $75 million in the current year. The free cash flow is expected to grow at a 3% rate forever. Heavy Metal has 20 million shares outstanding, $400 million in debt and no excess cash. The tax rate is 40%, the required return on equity is 12%, and the WACC (cost of capital) is 9%. Compute the Enterprise Value of Heavy Metal and the value of the stock per share.