Question No.

1 Cash flows given below for a project, Year 0: -$1,000.00 Year 1: $100.00 Year 2: $110.00 Year 3: $121.00 Year 4: $133.10 Year 5: $146.41 Year 6: $161.05 Year 7: $177.16 Year 8: $194.87 Year 9: $214.36 Year 10: $235.79 Year 11: $259.37 A discount rate of 15%, please calculate the Net Present Value (NPV) and the Internal Rate of Return (IRR) for this project.

Question No. 2 Mac Food is primarily a producer of meats, but the company also has a large, processed foods segment. Macs dividends per share are growing at a constant rate for the past four years (12%).

Date Dividends per share

29-Aug-01 0.0400

28-Nov-01 0.0448

27-Feb-02 0.0502

29-May-02 0.0562

28-Aug-02 0.0629

26-Nov-02 0.0705

26-Feb-03 0.0790

28-May-03 0.0884

27-Aug-03 0.0990

26-Nov-03 0.1109

26-Feb-04 0.1242

27-May-04 0.1391

30-Aug-04 0.1558

29-Nov-04 0.1745

25-Feb-05 0.1955

30-Aug-05 0.2189

27-Feb-06 0.2452

30-May-06 0.2746

(i) Calculate Cost of Equity(rE) for MAC using Gordon per share dividend method (if current stock price is 28.46 Following are the monthly price data of MAC and Fort companies from 2001-2006

Prices Date MAC Fort

Jan-01 35.38 1,366.01

Feb-01 27.32 1,239.94

Mar-01 25.17 1,160.33

Apr-01 29.57 1,249.46

May-01 25.86 1,255.82

Jun-01 28.00 1,224.38

Jul-01 28.54 1,211.23

Aug-01 26.88 1,133.58

Sep-01 19.57 1,040.94

Oct-01 23.24 1,059.78

Nov-01 31.16 1,139.45

Dec-01 31.45 1,148.08

Jan-02 35.04 1,130.20

Feb-02 28.55 1,106.73

Mar-02 30.41 1,147.39

Apr-02 28.61 1,076.92

May-02 27.62 1,067.14

Jun-02 18.27 989.82

Jul-02 18.79 911.62

Aug-02 16.67 916.07

Sep-02 13.89 815.28

Oct-02 17.30 885.76

Nov-02 20.88 936.31

Dec-02 15.57 879.82

Jan-03 15.66 855.7

Feb-03 17.25 841.15

Mar-03 16.28 848.18

Apr-03 18.40 916.92

May-03 20.82 963.59

Jun-03 20.81 974.5

Jul-03 24.89 990.31

Aug-03 28.59 1,008.01

Sep-03 27.52 995.97

Oct-03 32.95 1,050.71

Nov-03 33.54 1,058.20

Dec-03 32.05 1,111.92

Jan-04 30.52 1,131.13

Feb-04 29.20 1,144.94

Mar-04 27.20 1,126.21

Apr-04 25.73 1,107.30

May-04 28.55 1,120.68

Jun-04 27.60 1,140.84

Jul-04 24.38 1,101.72

Aug-04 21.29 1,104.24

Sep-04 20.06 1,114.58

Oct-04 22.26 1,130.20

Nov-04 22.38 1,173.82

Dec-04 23.39 1,211.92

Jan-05 22.45 1,181.27

Feb-05 23.99 1,203.60

Mar-05 23.23 1,180.59

Apr-05 23.52 1,156.85

May-05 26.96 1,191.50

Jun-05 26.02 1,191.33

Jul-05 27.14 1,234.18

Aug-05 25.24 1,220.33

Sep-05 24.19 1,228.81

Oct-05 23.06 1,207.01

Nov-05 26.27 1,249.48

Dec-05 24.57 1,248.29

Jan-06 25.90 1,285.45

(ii) Calculate beta () and find Cost of Equity (rE) using CAPM for MAC food, if Rf is 4.93% and E(rM) is 9.88%.

COMPUTING THE COST OF DEBT FOR MAC 2005 2004

Cash and cash equivalents 316,000,000 230,000,000

Current debt 805,000,000 533,800,000

Long term debt 9,475,000,000 6,024,000,000 Net debt 9,964,000,000 6,327,800,000

Interest paid 996,000,000

(iii) Given the information above calculate Cost of Debt (rD) of MAC. If

Share outstanding 242,019,424 Share price, end 2005 28.46

Equity value, E 6,887,872,807

Net Debt, D 9,964,000,000

Tax rate 29.55%

(iv) Calculate WACC based on (1) Gordon per-share dividends, (2) Classic CAPM, (3) Tax adjusted CAPM and interest from financial statement