Question: Rating Average Default Rate 0.0% 0.1% 0.2% 0.45% 2.2% 5.5% 12.2% Recession Deafault Rate 0.0% 1.0% 3.0% 3.0% 8.0% 16.0% 48.0% Average Beta 0.05 0.05

Rating Average Default Rate 0.0% 0.1% 0.2% 0.45% 2.2% 5.5% 12.2% Recession Deafault Rate 0.0% 1.0% 3.0% 3.0% 8.0% 16.0% 48.0% Average Beta 0.05 0.05 0.05 0.10 0.17 0.26 0.31 Equity Company Market Capitalization ($mm) Total Enterprise Value ($mm) Debt Rating Beta Taggart 4500 Transcontinental 8000 1.1 BBB Rearden Metal 3800 17200 1.3 AAA Wyatt Oil 2400 3800 0.9 A Nielson Motors 1500 4400 1.75 BB Your estimate of the debt beta for Nielson Motors would be: 0.17 1.00 0.05 0.10

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