1. You are determining whether your company should undertake a new project and have calculated the NPV of the project using the WACC method when the CFO, a former accountant, notices that you did not use the interest payments in calculating the cash flows of the project. What should you tell him? If he insists that you include the interest payments in calculating the cash flows, what method can you use. Explain?
2. What are the two types of risk that are measured by a levered beta?
3. If you know the unlevered beta, how can you derive the levered beta?
4. Select a real company and use this method to calculate its levered beta.