Important General Instructions for Reporting Numerical Answers: - Do not round intermediate calculations. Report your answers to the number of decimal places requested. - Unless otherwise instructed, solve problems in the given units. IE: if given units are in $K, complete your computations in these units and, as applicable, report your answer in these units (without writing "$" or "K"). - Do not report any numerical answer as a percent. IE: for example, write 0.324 instead of 32.4%. - Report negative numbers with a leading minus sign, like this (for example): -23.451 Not like this: (23.451). - Note that Canvas removes trailing insignificant figures. If you type, for example, 41.350, Canvas will remove the last decimal place and record your answer as 41.35 This is fine because 41.35 = 41.350. - Assume time is measured in years unless otherwise stated. Question 2 1 pts For year 20X1, Zero Motorcycles earns $30MM of EBIT. If the firm's tax rate is 30% and it pays 10% interest on $100MM of debt, what is its NI for 20X1? Assume the firm's Taxable Income is equal to its EBT. Round your answer to one decimal place. Question 3 1 pts What is this company's pre-tax rp in year 2? Do not represent your number as a percent. Record your answer to three decimal places. Balance Sheet Year 1 Year 2 Total Assets 21,000.0 24,200.0 Liabilities AP 5,250.0 5,500.0 Total Debt 3,150.0 4,400.0 Etc Income Stmnt Year 1 Year 2 Revenue 945.0 990.0 SGA 141.8 148.5 Interest 52.5 110.0 EBT 750.8 731.5 Etc Question 5 1 pts BigBang Inc - a specialized entity - is raising $100MM in equity capital (representing 100% ownership of the firm). BigBang is telling potential investors that it expects to grow the $100MM by 14.2% in 1.5 years. At this time (1.5 years from now), BigBang will sell the assets, pay its owners all the proceeds and close down. What is BigBang's cost of equity capital, r? Round your answer to three decimal places. Hint: Look at the Specialized Entity example near the beginning of CH14. Question 6 SuperCo currently has no debt, but it is thinking of taking out a loan. Consider this information comparing the company as-is vs with-debt: Item SuperCo with No debt SuperCo With debt Debt Principal 0.0 1,000.0 (Loan) Interest @ 8% 0.0 80.0 Tax rate 35% 35% Income Statement No debt Revenue 900.0 SGA 315.0 With debt 900.0 315.0 1 pts By how much will the company's NI be reduced if it takes on the debt? Assume the company's only expense except for interest (if any) and tax is SGA. Represent your answer as a positive number, and round to zero decimal places. Question 11 2 pts You (as a private equity investor) note that GoodCo REIT is a decent-looking, debt-free company, which is not managed very well. You are therefore considering this project: - Buy 100% of GoodCo today for $1,000K - Receive estimated GoodCo dividends of $50K for the next two years (at EOY 1 and EOY 2). - Sell the firm at EOY 2, just after you receive the EOY 2 dividend. - You estimate that, do to your awesome management improvements, them market price of the firm will be $1,200K when you sell. - You believe, based on your CAPM analysis, that r for the firm is 12.00% What is the NPV of this project? As always, use the given units. Represent your answer to two decimal places.