Sensitivity Analysis for Target Consolidated WACC Sensitivity to: Explain how different capital structure and risk free interest rates affect the cost of Capital? What happens when leverage increases? What is the impact on cost of capital when the cost of debt decreases and why? 18.4% 4.00% 4.75% 5.00% 8.72% 8.57% 8.95% 8.79% 30% % 40% % 50% 65% 70% 75% 80% DIE 8.04% 7.91% 7.79% 7.64% 7.60% 7.55% 7.51% 30-Year T-Bond 4.25% 4.50% 8.27% 8.50% 8.13% 8.35% 8.01% 8.22% 7.85% 8.06% 7.80% 8.01% 7.76% 7.97% 7.72% 7.93% 8.44% 8.27% 8.22% 8.66% 8.48% 8.43% 8.38% 8.34% 8.18% 8.13% WACC Sensitivity to: Explain how different capital structures and risk profile affect the cost of Capital? What happens when credit quality increases or decreases? Would a lower credit risk grade increase or decrease the overall cost of capital? 8.4% 1. 10% 8.86% 1.50% 8.92% 30% 40% 50% 65% 70% 75% 80% DIE Consolidated Spread on T-Bond 1.20% 1.30% 1.40% 8.88% 8.89% 8.90% 8.70% 8.72% 8.74% 8.56% 8.58% 8.60% 8.37% 8.39% 8.41% 8.31% 8.34% 8.36% 8.26% 8.28% 8.31% 8.21% 8.24% 8.26% 8.69% 8.54% 8.34% 8.29% 8.23% 8.18% 8.76% 8.62% 8.44% 8.39% 8.34% 8.29% Cost of Equity Sensitivity to Explain how different capital structures and Asset Betas affect the cost of Equity? What happens when the beta of the consolidated entity increases or decreases? What does a higher beta mean and what is the effect on the hurdle rate for different projects? 11.6% 0.80 1.00 30% 40% 50% 65% 70% 75% Asset (Unlevered) Beta 0.85 0.90 10.00% 10.29% 10.25% 10.56% 10.51% 10.83% 10.89% 11.24% 11.02% 11.37% 11.14% 11.51% 11.27% 11.64% 9.70% 9.94% 10.18% 10.54% 10.66% 10.78% 10.90% 0.95 10.59% 10.87% 11.16% 11.58% 11.73% 11.87% 12.01% DIE 10.88% 11.18% 11.48% 11.93% 12.08% 12.23% 12.38% 80%