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FIN3310: INTERMEDIATE FINANCIAL ANALYSIS SPREADSHEET ASSIGNMENT: Chapter 2 1. Retrieve the file HWChapter2 and solve Problem 2-8, Problem 2-10, and Problem 2-12 using the organizational design displayed in the worksheet file. Do not modify the fonts, format, or cell addresses. 2. Enter equations that solve for the values required in Cells F5, B8, F14, B16, F2, B23, B31, B38 3. Enter equations that solve for the values required in Cells F48:F51, G48:G51, D54. 4. Enter equations that solve for the values required in Cells D63, D65, F67. 5. Print the worksheet. Grade Value: 15 points Submission date: THE ASSIGNMENT IS DUE AT THE BEGINNING OF CLASS NO LATE ASSIGNMENTS WILL BE ACCEPTED You may work alone or with one classmate. If you and a classmate work together, print one copy of the solutions and write both names at the top of the first page. All solution pages must be stapled or clipped together, in proper sequence: Problem 2-8, followed by Problem 2-10 and then Problem 2-12 These instructions are general and apply to future assignments.

Problem 2-8 Part a. 5% TRF M- UTI 12% Note IM - IRF IUTI Part b. (1) rRF 6% The slope of the security market line is equal to (rM - rRF), the market risk premium Since the slope remains constant in (1), then rM must increase 13% Note: rM -IRF M- ruT (2) IRF 4% The slope of the security market line is equal to (rM - IRF), the market risk premium Since the slope remains constant in (2), then rM must decrease 11% Note: rM IRF M- Part c. (1) rRF- 5% 14% M- Since the slope does not remain constant in (1), the market risk premium increases if rM increases from 12% to 14%. rM-rRF-9% TUTI 5% 11% (2) rRF- M- Since the slope does not remain constant in (2), the market risk premium decreases ifrM decreases from 12% to 1 1%: rM-rRF-6% TUTI

Problem 2-10 IRF 5% M- 14% Portfolio Weight Stock Investment $400,000 $600,000 $1,000,000 2,000,000 $4,000,000 Beta 1.5 0.5 1.25 0.75 Required Return - rRF + (rM - IRF)b Required return on portfolio - Problem 2-12 Stock Beta 1.5 0.75 IRF 7% 13% rR-Required returnrRF (rM - IRf)b- rs - Required return -IRF + (rM - rRF)b- M- (rr - Is)- additional required rate of return on the riskier stock

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Home nert Page Layout Formulas Data Review View dd-Ins Cut E AutoSum Wrap Text aCopy в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting as Table Styles2 Clear Sort &Find & Format Painter Clipboard Y353 IU Alignment Number Cells Edting Formula Bar IV IW Ix IY iZ JA JB JC JD JE JG JH 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 4 KE CAPM UTILITY, SHARPE, beta bond 2--8 5% 12% Part a note : rM-rRF-1296-596-7% bUTI rUTI - 14.80% IX355+ 1X357(1X356-1X355) formula : ke-rRF + bUTI(rM-rRF) Part B 6% 13% note : rM-rRF-1396-696-7% bUTI rUTI - 15.80% 4% 11% note : rM_rRF = 11%-4% = 7% bUTI rUTI = 13.80% future INDEX INTL CAP BUDLEASING PV, FV, ANNUITYDIR cleanYIELD bond tru WACC RESI ex d 130% 01-02-2019Home nert Page Layout Formulas Data Review View dd-Ins s Cut aCopy E AutoSum Wrap Text в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 C Paste Conditional Format CeInsert Delete Format Formatting as Table Styles2 Clear Sort &Find & Format Painter Clipboard Y390 IU Font Alignment Number Cells Edting Formula Bar IV Part c IW IX IY iZ JA JB JC JD JE JG JH 372 373 374 375 376 377 378 379 380 381 382 383 384 385 386 387 388 389 390 4 KE CAPM UTILITY, SHARPE, beta bond c 5% 14% 1.4 rRF- note : rM_rRF-14%-5%-9% bUTI- rUTI = 17.60% 5% 11% 1.4 rRF- note : rM_rRF-11%-5%-6% bUTI- rUTI- 13.40% DGM future INDEX INTL CAP BUD ING PV, FV, ANNUITYDIR cleanYIELD bond stru WACCRESI ex d 130% 01-02-2019Home nert Page Layout Formulas Data Review View dd-Ins Cut Σ AutoSum ー E ゴWrap Text ta copy. в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 Conditional Format eCell Insert Delete Format Sort &Find & 2 ClearFe Select Edting Format Painter Formatting, as Table w styles. ▼ ㆆ ▼ Clipboard Alignment Number Cells Formula Bar 63 64 65 2--10 5% 14% rRF PORTFOLIO WEIGHTS required return 18.00% 2.00% 16.00% 10.40% 67 stock INVESTMENT BETA 1.5 0.5 1.25 0.55 0.1 [400000/4000000] 0.15 [600000/4000000] 0.25 1000000/4000000] 0.5 2000000/4000000] 69 70 71 72 73 74 75 76 1000000 2000000 4000000 REQUIRED RETURN ON PORTFOLIO = REQUIRED RETURN X PORTFOLIO WEIGHTS 11.30% T68 V68+T69 V69+T70 V70+T71 V71 78 79 80 81 4 KE CAPM UTILITY, SHARPE, beta bond future INDEX INTL CAP BUDLEASING PV, FV, ANNUITYDIR cleanYIELD bond tru WACC RESI ex d 130% 01-02-2019Home nert Page Layout Formulas Data Review View dd-Ins s Cut ta copy. Σ AutoSum ー E ゴWrap Text в 1 프 . Ej-., Δ. : rーー 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting as Table Styles2 Clear Sort &Find & Format Painter Clipboard Alignment Number Cells Edting Formula Bar 78 79 80 81 82 83 84 85 86 87 2--12 rRF STOCK BETA 7% 1.5 0.75 13% 16.00% R79+U79*(R80-R79) 11.50% R79+U80(R80-R79) 4.50% R82-R83 89 90 91 92 93 94 95 4 KE CAPM UTILITY, SHARPE, beta bond c M port future INDEX INTL CAP BUD ING PV, FV, ANNUITY DIR cleanYIELD bond stru WACC RES1 ex di 130% 01-02-2019

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