Complete? Reference Initials Notes see see SALY SES None N/A SES Recalculation SALY SES Discussed any potential changes with mgmt; none noted. 1 Exhibit 4 2 Valuation Schedules: Styles Finance Co. 3 December 31, 2019, WACC Analysis (U.S. Reporting Unit) 4 Description % Notes 5 Risk-free rate 1.92% Yield on 10 year treasury bond 6 Equity risk premium 5.60% Long horizon equity risk premium. 7 Beta 1.1 Beta is based on guidelines for public companies. 8 8.08% Risk free rate + [beta x equity risk premium]. 9 Unsystematic risk factors: 10 Size premium 2.00% Applicable size premium. Company-specific risk Risk premium is based on qualitative factors that reflect specific risks not factored 1.00% 11 in the beta or size premium. 12 Cost of equity 11.08% Risk-free rate + [beta x equity risk premium] + size premium + company-specific ris 13 Estimated pretax cost of debt 6.00% Applicable commercial lending rate; good-to-excellent credit. 14 Federal tax rate 10.0% Statutory corporate income tax rate - Federal 15 State tax rate 5.5% Statutory corporate income tax rate - State 16 After-tax cost of debt 5.1% After-tax cost of debt 17 Equity-to-capital 70.0% Industry/market capital structure. 18 Debt-to-capital 30.0% Industry/market capital structure. 19 Estimated WACC (rounded) 9.3% WACC = [equity-to-capital * cost-of-equity] + [debt-to-capital * after-tax cost of de 20 SALY SES Discussed any potential changes with mgmt; none noted. N/A SES Recalculation see see see N/A SES Recalculation SALY SES None SALY SES None N/A SES Recalculation 2) Exhibit 4: SFC's determination of weighted average cost of capital (WACC) Required: Complete the audit worksheet. Provide an external reference for each input to the model. Use your judgment to determine if an input is reasonable or not. If you consider one of SFC's inputs to unreasonable or incorrect, what affect does a reasonable/correct input have on the overall analysis (i.e., the final assessment in 2)? Reasonable?* Reference (Y/N) External source and discussion for any inputs deemed unreasonable *For inputs you determine to be unreasonable or incorrect, provide what you think a reasonable value would be, and what affect the change would have on the assessment of goodwill (i.e., the final assessment in 1) Complete? Reference Initials Notes see see SALY SES None N/A SES Recalculation SALY SES Discussed any potential changes with mgmt; none noted. 1 Exhibit 4 2 Valuation Schedules: Styles Finance Co. 3 December 31, 2019, WACC Analysis (U.S. Reporting Unit) 4 Description % Notes 5 Risk-free rate 1.92% Yield on 10 year treasury bond 6 Equity risk premium 5.60% Long horizon equity risk premium. 7 Beta 1.1 Beta is based on guidelines for public companies. 8 8.08% Risk free rate + [beta x equity risk premium]. 9 Unsystematic risk factors: 10 Size premium 2.00% Applicable size premium. Company-specific risk Risk premium is based on qualitative factors that reflect specific risks not factored 1.00% 11 in the beta or size premium. 12 Cost of equity 11.08% Risk-free rate + [beta x equity risk premium] + size premium + company-specific ris 13 Estimated pretax cost of debt 6.00% Applicable commercial lending rate; good-to-excellent credit. 14 Federal tax rate 10.0% Statutory corporate income tax rate - Federal 15 State tax rate 5.5% Statutory corporate income tax rate - State 16 After-tax cost of debt 5.1% After-tax cost of debt 17 Equity-to-capital 70.0% Industry/market capital structure. 18 Debt-to-capital 30.0% Industry/market capital structure. 19 Estimated WACC (rounded) 9.3% WACC = [equity-to-capital * cost-of-equity] + [debt-to-capital * after-tax cost of de 20 SALY SES Discussed any potential changes with mgmt; none noted. N/A SES Recalculation see see see N/A SES Recalculation SALY SES None SALY SES None N/A SES Recalculation 2) Exhibit 4: SFC's determination of weighted average cost of capital (WACC) Required: Complete the audit worksheet. Provide an external reference for each input to the model. Use your judgment to determine if an input is reasonable or not. If you consider one of SFC's inputs to unreasonable or incorrect, what affect does a reasonable/correct input have on the overall analysis (i.e., the final assessment in 2)? Reasonable?* Reference (Y/N) External source and discussion for any inputs deemed unreasonable *For inputs you determine to be unreasonable or incorrect, provide what you think a reasonable value would be, and what affect the change would have on the assessment of goodwill (i.e., the final assessment in 1)