Question: QUESTION 4 Questions 4-8 are based on information below. Some of the questions are sequential, meaning that one question's answer will be the next question's

QUESTION 4 Questions 4-8 are based on information below. Some of the questions are sequential, meaning that one question's answer will be the next question's input number. If you get the previous question wrong, it could trigger a chain of wrong answers. I would like to credit you back if you set up the calculation right, and if the wrong answer is purely due to the wrong input. In order for me to do this, please upload a file at the end of the exam to show how you got the answers. It could be an Excel spreadsheet, Word file or any file as long as I can clearly see the calculation. This is purely optional. The company Youphone is expected to generate $48 million in FCFF next year. The firm currently is extremely over-levered with a debt to equity ratio of 4:1. The beta of the stock is now 2.72 and the pre-tax cost of debt is 12%. The marginal tax rate is 40%, the risk free rate is 4% and the market risk premium is 6%. You believe that new management can turn the firm around by restructuring the firm's financing mix, to make it 50% debt and 50% equity. That will reduce the pre-tax cost of debt to 8%. The firm is expected to have a 2% perpetual growth rate. Question 4: The unlevered beta of the company is: O a. 1.84 O b. 0.8 O C. 2.35 O d. 1.7 O e. None of the other answers. QUESTION 5 (See Question 4 for background information.) With the new financial structure (50% debt and 50% equity), estimate the new beta for the company. O a. 1.04 O b. 1.12 O C. 1.28 O d. 2.57 O e. None of the other answers.QUESTION 6 (Please refer to Question 4 for background information.) What would be the new cost of equity under the new financial structure? O a. 19.44% O b. 6.24% O C. 11.68% O d. 10.24% O e. None of the other answers. QUESTION 7 (Please refer to Question 4 for background information.) What would be the new cost of capital under the new financial structure? O a. 7.52% O b. 9.12% O C. 9.44% O d. 8.24% O e. None of the other answers. QUESTION 8 (Please refer to Question 4 for background information.) What would the value of the firm be under the new financial structure? O a. 869.56 O b. 769.23 O C. 674.15 O d. 645.16 O e. None of the other answers

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