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Chapter 7 Questions

Chapter 7 Questions

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


Damodaran, A. (2010). Applied corporate finance. John Wiley & Sons.


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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

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!


Damodaran, A. (2010). Applied corporate finance. John Wiley & Sons.

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