Independent assignment — Module 1: The SMB Capital Stack: Leverage Dynamics, Senior Debt, Mezzanine, and Equity

Student version. Units: actual USD. New inputs below are independent of the chapter's worked teaching example. Complete this assignment before opening the instructor key.

Conceptual review — 20 points

Explain the economic purpose of this lesson's principal measure or transaction mechanism. Identify its numerator, denominator or account perimeter and explain one situation in which the same number could be misinterpreted by an acquirer.

Calculation exercise — 35 points

Buy for $1.5m with $900,000 interest-only debt at 10% and $600,000 equity. Sell one year later for $1.7m, no other flows. Calculate equity return. Show the equation, intermediate steps, units and rounding. An unsupported number receives only partial credit.

Spreadsheet construction — 30 points

Build the calculation in a separate lab sheet using blue input cells and black formulas. Link all calculated outputs to inputs, include a visible reconciliation, and change one relevant assumption by 10% to demonstrate that the model updates. Explain the direction before recalculating. Use the learner workbook as the course's main construction artifact and identify the sheet relevant to this lesson.

Applied acquisition judgment — 15 points

What risk is missing if the sponsor personally guarantees the debt? State the evidence needed, the consequence for price or cash, and a reasoned proceed/revise/decline implication. A supported decline can earn full credit.

Submission and critical checks

Submit your workbook and a one-page explanation. Pass at 80/100 with explicit units, no hidden plug, no duplicated cash payment or recovery, and a valid applicable denominator. Missing a critical check requires correction even if points total 80. The chapter contains teaching examples, not a solution to this independent assignment.