BUS 413 Final Questions and Answers with Verified Solutions | Latest Update

BUS 413 Final Questions and Answers with Verified Solutions |
Latest Update




QUESTION
Vl =

Answer:
Vu + PVITS

QUESTION
PVITS is basic model (MM)

Answer:
B x t = (B x rb x t)/rb

QUESTION
Vl, when using Vl to find ITS in LBO

Answer:
Vl(5) = UCF5( 1+ g)/(WACC - g)

QUESTION
Beta levered

Answer:
(1 + B/Sl x (1 - t)) x Beta unlevered

QUESTION
rs

Answer:
levered cost of equity rs = Rf + BetaLevered x(Rm - Rf)

QUESTION
r0

Answer:
unlevered cost of equity can also do CAPM to find, using unlevered beta

, QUESTION
MM ultimate formula rs =

Answer:
ro + B/Sl x (r0 - rb) x (1 - t)

QUESTION
MM approach steps

Answer:
1. Use capm with a public firms beta to find rs for the public firm.
2. use MM formula to solve for r0
3. assume r0 pulic = r0 private
4. plug r0 private and other information about private company into MM to find Rs private

QUESTION
Pure-play approach steps

Answer:
1. Unlever beta using B/Sl and tax rate of the public firm (pure-play formula)
2. assume beta unlevered public = beta unlevered private
3. relever beta unlevered private usign pure-play
4. plug in beta levered private into CAPM to find rs

QUESTION
When is a lease capital leasing (aka financing)

Answer:
1. title transfer
2. purchase option
3. lease term >= 75% of useful life
4. PV lease payments >= 90% of FMV

QUESTION
CFs for lease minus buy (leasee POV)

Answer:
t0: + value of machine t1: - lease payments x (1 - t) - D&A x t

QUESTION
lease from lessor POV

Answer:
t0: - value of machine t1: lease payments x (1 - t) + D&A x t