Question 9 1 points Save Anover Summit Builders has a market debt-equity ratio of 1.30, a corporate tax rate of 38%, and pays 9 interest on its debt. What is the difference between its pre-tax WACC and post tax WACC? A 3.15 B. 1.93% OC 9.87% 0.4444 Question 10 1 points Save Answer Consider the following income statement for Aldi-Woolworths Inc. (all figures in Millions Year 2014 2015 2016 Total Sales 60,553 56,434 53,791 Cost of goods sold 45,565 42,140 39,637 Selling General & Admin expenses 11,688 12,191 11,575 Depreciation 1.265 1,256 1,209 Operating Income 2.035 847 1,370 Other Income 0 0 O EBIT 2,035 847 1,370 Interest expense 510 557 604 Earnings before tax 1.525 766 Taxes (35) 534 102 268 Net Income 991 189 The interest rate tax shield for Aldi- Woolworths Inc, in 2016 is closest to Depreciation 1,265 1,256 1.200 Operating income 2,035 8:47 1,370 Other Income 0 0 0 EBIT 2035 847 1.370 510 557 604 1525 290 766 Interest expense Earnings before tax Taxes (358) Net Income 534 102 268 991 189 498 The interest rate tax shield for AldWoolworths inc. in 2016 is closest to O A 5195 million 8.536 million OC 5102 million D. $211 million Question 11 4 points Save Answer This question consists of two parts. Part 1: Paddington Industries expects EBIT of 518 million each year. Paddington's capital expenditure is expected to equal depreciation each year. There will not be change in the net working capital. Paddington's corporate tax rate is 35%, and its unlevered cost of capital is 10%. Paddington also has outstanding debt of 40 milion market value, and it expects to maintain this level of debt permanently a) The value of Paddington Industries without leverage is s million. (Input number only as your answer. Round it to the nearest whole number.) by The value of Paddington Industries with leverage is s million. Cinput number only as your answer. Round it to the nearest whole number.) Part 2: XYZ is a biotechnology start-up firm. CEO of XYZ now must choose one of three R&D projects. The pay-offs (after tax) and their likelihood for each project to success in a year are shown below. The risk.free rate is 34 and market risk premium is 74. Project Ais of diversifiable risk. Project B and Care of market risk. That is, the required returns are different for these projects Project Probability of Success Payoff in 3 milioni A 100% 1236 50 50% 0 C 10% 370 90 20 b) The value of Paddington Industries with leverage is $ million. (Input number only as your answer. Round it to the nearest whole number.) Part 2: XYZ is a biotechnology start-up firm. CEO of XYZ now must choose one of three R&D projects. The payoffs (after tax) and their likelihood for each project to success in a year are shown below. The risk-free rate is 3% and market risk premium is 7%. Project A is of diversifiable risk. Project B and Care of market risk. That is, the required returns are different for these projects Project Probability of Success Payoff (in 5 milion) A 100% 123.6 B 50% 162 50% 0 C 370 10% 90% 20 Suppose that XYZ has debt of $150 million due at the time of the project pay-off. Which project has the highest expected pay-off for equity holders today? (Provide your answer by choosing from Project A, Project B or Project C) The highest expected pay off for equity holders today is $ million. Input only numbers as your answer. Round it to the nearest whole number.) Question 12 1 points Save Answer Which statement below is an appropriate characterization of the asset beta? A. The asset beta is readily observable for comparable firms. B. The asset beta is an estimate of the systematic risk a stock would have in the absence of leverage C The asset beta is an estimate of the systematic risk a stock would have once leverage is added into the analysis. D. The asset beta is larger than the equity beta for small stocks