Typos in solutions to Sample Final (6c and 7c)
6c should have said "No", and the WACC in &c should have been 12.7536%.
Extra Office Hours
Monday, May 9: 10 am - noon
Tuesday, May 10: 10 - 11:45 am & 1:15 - 4 pm
Wednesday, May 11: 10 - 11:45 am & 1:15 - 4 pm
Room for Review Session
The review session will be on Wednesday, May 11, 5:30-6:30 pm, in room 130 Wohlers.
Total points for HWs and exam
The HWs were graded out of 95, 76, 65 and 95 respectively. Midterms were out of 110 and 111.
PVGO computation for group project
I have created some confusion by making conflicting statements in the project description and the lecture notes. There is also one additional point that needs to be clarified.
The EPS you need is the EPS for the current year. This is EPS1. Normally we assume these earnings for the current year are received at the end of the year (time 1). For the PVGO computation, we are assuming they are received at the midpoint of the year. Depending on when your company's fiscal year ends, you may find that the midpoint of the current fiscal year has already passed. In that case your earnings stream will start on the next midpoint date.
For the PVGO computation, I do want you to assume that if the firm does not make any more positive NPV investments, their earnings will just remain constant at the current level. In other words, EPS each year will just equal EPS1.
Estimating asset beta for group project (revised)
To estimate the debt beta when debt is lower than investment grade, you need to first estimate the asset beta for your firm. This gets a little complicated, since you need the debt beta in order to compute the asset beta. The formula for βa is:
βa = [(D/V) βd (1
- T’)
(This is a one-step formula that corresponds to first computing βWACC and then computing βa from that.)
The best way to proceed is:
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Take an initial trial value for βd |
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If your debt ratio and equity beta look "normal", the average debt beta of 0.2 is a good trial value. If your debt ratio or equity beta is unusually high or low, correspondingly adjust the trial value. |
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Use this trial value of βd to compute βa |
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Then comparing this βa and the debt ratio to the average firm, decide what your final value of βd should be |
Grading Error in Midterm 2 (pink exam only)
In the true-false question, I have graded part f incorrectly, taking off points if you correctly marked it as false. Please have your grade corrected if this happened to you.
Problem
As announced in class, the revised dates will be:
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Problem set #4 will be posted on 4/20 and due on 4/27 |
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Second Group Project Report will be due on the date of the final exam |
Final Exam
The final exam will be on Thursday, May 12, 1:30-4:30pm, in 209 Huff Hall (instead of 8 - 11am that day as stated on the syllabus).
Please email me by Thursday May 5 if you have a conflict.
Double Coupons scheme for Questions-of-the-day
Twice over the rest of the semester, you can ask for your score on the question-of-the-day to be doubled. What will be doubled is just the 5 points for the question, not the 5 points for attendance. Just write "DOUBLE" alongside your answer that day. Use your coupons wisely and well! And make sure that you do use both by the end of the semester.
Turning in Homeworks
Please note the following for all future homeworks:
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I will not accept unstapled work. |
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Handwritten answers are fine. |
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You must show your work. This means it must be clear how everything was computed. |
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If you turn in an Excel printout for any question, you have to type in the corresponding equations (with symbols and/or numbers for variables) to explain your work. I don't want cell reference formulas. |
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