Sample Answer
Chapter 7 Questions
Question 6
Question 6 | |||||
a | class A stock | Class A share price | Class B stock | Class B share price | Value of Equity |
50,000 | 100 | 100,000 | 90 | 14000000 | |
b | Value of debt | Value of equity | Debt ratio | ||
5,000,000 | 14,000,000 | 0.263157895 |
Question 11
Question 11 | ||||||||||||
Expected Market Return by using SML of CAPM = Risk Free Rate + Market Risk Premium (Beta) | ||||||||||||
Risk free rate | Riskless Rate | Beta | Expected Market Return | |||||||||
7% | 6.50% | 1.1 | 14.1500% | |||||||||
Expected return = risk free rate + market risk premium (beta) + expected value of size factor(coefficient for size effect) + book to market factor (coefficient for book to market effect) | ||||||||||||
Risk Free Rate | Riskless rate | Beta | Expcted value size factor | Coeeficient for size effect | Book to market Factor | Coefficent for book market effect | ||||||
7% | 6.50% | 1.1 | 5% | 0.7 | 4% | -0.3 | 16.45% |
Question 12
Question 12 | |||
Outstanding shares | Share Price | Value of shares at offering Price | |
50,000,000 | $ 22.00 | $ 1,100,000,000.00 | |
Outstanding shares | Stock market price | Value of shares at market price | |
50,000,000 | $ 40.00 | $ 2,000,000,000.00 | |
Value of shares at market price | Value of shares at offering Price | ||
$2,000,000,000.00 | $1,100,000,000.00 | $900,000,000.00 |
References
Damodaran, A. (2010). Applied corporate finance. John Wiley & Sons.
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Question
Week 6 Chapter 7 Questions
Select three formula-driven-problems from Chapter 7 that you wish to showcase and prepare a Microsoft Excel document showing the Excel formulas used to prepare the solution for those problems.

Chapter 7 Questions
REMINDER: Part of the grade that you receive on your problems is the utilization of Formulas. Therefore, do not pick problems that only require a narrative!
Textbook:
Damodaran, A. (2010). Applied corporate finance. John Wiley & Sons.
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