Present Values 3
- Lecture1.1
  
  Introduction
- Lecture1.2
  
  Solutions
- Lecture1.3
  
  List Comprehension Review
NPV vs. IRR 4
- Lecture2.1
  
  Introduction
- Lecture2.2
  
  The Functions Part 1
- Lecture2.3
  
  The Functions Part 2
- Lecture2.4
  
  Testing NPV vs. IRR
Other Profit Measures 4
- Lecture3.1
  
  Introduction
- Lecture3.2
  
  Measures Part 1
- Lecture3.3
  
  Measures Part 2
- Lecture3.4
  
  Investment Timing
Depreciation 4
- Lecture4.1
  
  Introduction
- Lecture4.2
  
  The Basic Problem
- Lecture4.3
  
  Creating the Depreciation Equation
- Lecture4.4
  
  The Tax Shield
Cash Flow Challenges 9
- Lecture5.1
  
  Introduction
- Lecture5.2
  
  Total Cash Flows
- Lecture5.3
  
  Solution 1
- Lecture5.4
  
  Solution 2
- Lecture5.5
  
  Solution 3
- Lecture5.6
  
  Solution 4
- Lecture5.7
  
  Solution 5
- Lecture5.8
  
  Solution 6
- Lecture5.9
  
  Solution 7
Capital Asset Pricing Model 3
- Lecture6.1
  
  Introduction
- Lecture6.2
  
  The Equation
- Lecture6.3
  
  Graphing CAPM
Risky Debt 3
- Lecture7.1
  
  Introduction
- Lecture7.2
  
  Adjusting Debt for Risk
- Lecture7.3
  
  Solution
Unlevering Equity 3
- Lecture8.1
  
  Introduction
- Lecture8.2
  
  The r for Equity
- Lecture8.3
  
  Including Taxes
Weighted Average Cost of Capital 4
- Lecture9.1
  
  Introduction
- Lecture9.2
  
  The Equation
- Lecture9.3
  
  Taxes
- Lecture9.4
  
  Solution
Debt Effect Analysis 2
- Lecture10.1
  
  Introduction
- Lecture10.2
  
  The Effect of Debt on Equity
WACC Challenge 2
- Lecture11.1
  
  Introduction
- Lecture11.2
  
  Solution
Relative Valuation 4
- Lecture12.1
  
  Introduction
- Lecture12.2
  
  Financial Concept
- Lecture12.3
  
  Solving Systems of Equations
- Lecture12.4
  
  Arbitrage
Forward Contract Valuation 3
- Lecture13.1
  
  Introduction
- Lecture13.2
  
  Forward Contract Basics
- Lecture13.3
  
  Forward Contracts

Introduction

First, for this challenge figure out the rate of equity to use based on the below companies. Unlever the equity rates and get the average of them. Here is the unlever function we created.

def unlever(r_a,r_d,E,D):
    return r_a + (r_a-r_d)*(D/E)

Now for the data, I will make your life easy and feed you the data as arrays. A, B, C and D are companies are the 4 elements of each array represent return on assets, return on debt, amount of Equity and amount of Debt (net debt so do not worry about cash) respectively.

a = [.08,.03,100,100]
b = [.1,.04,100,0]
c = [.09,.02,200,100]
d = [.08,.03,100,200]

Challenge

Unlever these and get the average, then find the WACC for a company which has rate of debt 4%, a $10.5 stock price, 20 million shares, 300 million of debt, and 200 million in cash. Also the tax rate is 20%.

Prev The Effect of Debt on Equity

Next Solution

Finance

Challenge

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Finance

Present Values 3

NPV vs. IRR 4

Other Profit Measures 4

Depreciation 4

Cash Flow Challenges 9

Capital Asset Pricing Model 3

Risky Debt 3

Unlevering Equity 3

Weighted Average Cost of Capital 4

Debt Effect Analysis 2

WACC Challenge 2

Relative Valuation 4

Forward Contract Valuation 3

Introduction

Challenge

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