[anichka]

Sorry, tax shield on debt was calculated on reducing loan balanace (4.5 mln payment each year)

[anichka]

Well,

in Q1
a) dividend capacity was approximately USD 24 mln.
b) i have used call option and bought futures (both June contracts), effective rate was 1.1605. Contract size 138. (receipt USD 17mln)
c) dividend growth was without project 6% and company value USD 536 mln, as I remember. With new project i got higher value, so new investment project should be undertaken.

Q2. Base case NPV – Discount cash flows using all-equity financed dis.rate (I have used given asset beta, no need of ungearing);
Financial side effect – 1. tax shield on debt 18*0.06*0.25, discounted by risk free rate -3.5%, years (2,3,4,5 – as tax is payable in the following year)
2. subsidy effect 8*0.08%*0.75 , discounted by risk free rate -3.5%, years (2,3,4,5 – as tax is payable in the following year)
3. tax shield on subsidy loan 8* (libor-0.08)%*0.25 ,discounted by risk free rate -3.5%, years (2,3,4,5 – as tax is payable in the following year)
Right issue- nothing
Issue costs – (18+8)/0.99*0.01=0.26

Q4.
Call option – P(e) – 15 mln, Pa – i assumed that npv of expansion of production would be 0+1.41(negative npv figure given), and undiscounted it using 12% to get to the 3rd year. Options rho is the measure of interest rate changes.

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