1. What impact does the repurchase plan have on M&Ms weighted-average cost of capital? Complete the table below (No Corporate Taxes)

Income Statement		Debt = 0	Debt = 500
	Revenue	1500	1500
	Operating expenses	1375	1375
	Operating profit	125	125
	Interest payments	0
	Taxes	0	0
	Net profit	125
	Dividends	125
	Shares outstanding	62.5
	Dividends per share	2.00
Cost of Capital
	Cost of debt	4.00%	4.00%
	Beta	0.800	Levered Beta
	Cost of equity	CAPM
	WACC	= D / V * Kd (1 - t) + (1 - D/V) * Ke
Cash flows
	Debt holders	= Interest payments
	Equity holders	= Dividend payments
	Free cash flow	= Op profit
Value
	Debt	= Int payments / Kd
	Equity	= Div payments / Ke
	Total	= Sum or FCF / WACC
	Share price 1	= Equity / Shares outstanding
	Share price 2	= DPS / Ke
	Value of Firm	= Value of unlevered + Tax shield
	D/E	= D / (V - D)
	D/V	= D / V

3) Complete the same table as in question 2 with a tax rate of 20%.

Exhibit 1 M&M PIZZA Pro Forma Financial Statement (in millions of Franco dollars, except per-share figures) Income Statement Revenue Operating expenses Operating profit Net Income 1,500 1,375 125 125 Dividends Shares outstanding Dividends per share 125 62.5 2.00 Balance Sh Current assets Fixed assets Total assets 450 550 1,000 Book debt Book equity Total capital 1,000 1,000