Đề 1

Đề 1:
1. 7 điểm:
Thanh Phat Corrporation (TP) is considering investing in toaster ovens for each of its 150 stores
located in the southwestern Vietnam. The high-capacity conveyor toaster ovens, manufactured by
Binh Tan, will require an initial investment of $15,000 per store plus $600 in installation costs per
store. The new capital (including the costs for installation) will be depreciated over five years
using straight-line depreciation toward a zero salvage value. Steve’s will also incur additional
maintenance expenses totaling $150,000 per year to maintain the ovens. In addition, the net
working capital is required $500.000 for the beginning of first year. At present, firm revenues for
the 150 stores total $10 million, and the company estimates that adding the toaster feature will
increase revenues by 10% per year (for the first and second year) and 15% per year for next three
years.
a. Calculate the initial investment
b. Calculate the revenues, costs and profits for five year (in table)
c. If TP faces a 30% tax rate, what expected project FCFs for each of the next five years will
result from the investment in toaster ovens?
d. If TP uses a 10% discount rate to analyze its investments in its stores, what is the project’s
NPV? Should the project be accepted?
2. 3 điểm
The Biscuits Enterprises is currently involved in its annual review of the firm’s cost of capital.
In order to calculate the cost of debt, the company had a bond issue in the beginning of 2016 that
was due in the ending of 2019 (ie. three years to maturity), carried an annual coupon rate of 6%,
paid semiannual interest, $1000 of face value, and had a market price of $980. Moving to the
next capital, the preferred shares issued by Biscuits, which pay a 8.6% annual dividend on a $50
par value. On February 26, 2017, these preferred shares were selling for $43.72.
In terms of calculation of cost of common equity, the firm’s CFO decided to use an average
number from two methods with following information. Firstly, in 2016, the company paid a
dividend of $ 4.15 per share, and on February 26, 2017, the firm’s stock closed trading a price of
$53.89. The analysts expected rate of constant growth in earnings is 3.17% per annum. Secondly,
the firm estimates that its equity beta is 1.75, and the yield to maturity on long-term US Treasury
bonds is 5.23%. Historically, it has used 6.34% to approximate the market risk premium.
a/ Calculate the cost of debt? (1 points)
b/ Calculate the cost of preferred equity? (0.5 points)
c/ Calculate the cost of common equity (1 points)
d/ Biscuits’ capital structure is comprised of 55% common equity, and 12% preferred equity.
What is the firm’s WACC with the tax of 20%? (0.5 points)
Đề 2:
Exercise 1 (7 points): In order to expand the market share, Mr. Lee Ki Wan, a CEO of Family
Corporation, is considering the introduction of a child security product consisting of tiny Global
Positioning System (GPS) trackers that can be inserted in the sole of a child’s shoe. The big
advantage of the trackers is to allow parents to track the child if he or she were ever lost or
abducted. The estimates are Unit price: $105, Variable costs per unit: $70, Fixed costs: $330,000
per year, Expected sales: 10,000 units per year. Moreover, it is expected that the unit sales will
be growing 10% annually (from the Year 2). Assume that this new product line will require an
initial investment of $1 million at the end of 2016 with $ 250,000 of working capital investment
and $ 630,000 of PPE. The PPE will last for seven years, being depreciated down to zero salvage
value using straight-line depreciation. In addition, the net working capital requirements equal to
25% of the sales.
a/ Make the depreciation table (1 points)
b/ If Lee’s faces a 35% tax rate, what expected project FCFs for each of the next five years will
result from the investment from 2017 to 2021? (4 points)
c/ If Lee’s uses a 15% discount rate to analyze its project, what is the project’s NPV and IRR?
Should the project be accepted? (2 points)
Exercise 2 (3 points): Smaltz Enterprises is currently involved in its annual review of the firm’s
cost of capital. Historically, the firm has relied on the CAPM to estimate its cost of equity
capital. The firm estimates that its equity beta is 1.25, and the yield to maturity on long-term US
Treasury bonds is 4.28%. The firm’s CFO is currently in a debate with one of the firm’s advisers
at its investment bank about the level of the market risk premium. Historically, Smaltz has used
7% to approximate the market risk premium. However, the investment banker argues that this
premium has shrunk dramatically in recent years and is more likely to be in the 3% to 5% range.
a. Estimate Smaltz’s cost of equity capital using a market risk premium of 4%. (1.5 points)
b. Smaltz’s capital structure is comprised of 75% equity (based on current market prices) and
25% debt on which the firm pays a yield of 5.125% before taxes at 25%. What is the firm’s
WACC using both a 3% and 5% market risk premium? (1.5 points)

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