TYU Inc. is considering liquidating the business. Given the facts below, calc- appropriate firm value. Expected FCF to Firm next year P5,000,000 Constant growth rate Cost of capital Assets, book value Assets, market value -4% 16% P24,000,000 P28,000,000
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- Use the below information to value the debt in a levered company with annual perpetual cash flows from assets that grow. The next cash flow will be generated in one year from now. Data on a Levered Firm with Perpetual Cash Flows Item abbreviation Value Item full name FFCF (millions) $30.5 Firm free cash flow (or Cash Flow from Assets) g 2% pa Growth rate of OFCF rD 3% pa Cost of debt rEL 6% pa Cost of levered equity D/VL 35% pa Debt to assets ratio, where the asset value includes tax shields tc 30% Corporate tax rate The current value of debt is a. 1157.5 b. 361.86 c. 405.12 d. 446.63 e. 672.03You are given the following information for a firm: EBIT x (1-T) this period Depreciation Net Working Capital Increase Asset Beta Capital Expenditures Growth Rate of FCF Risk Free Rate = = $17 million $2.4 million $0 1.1 $3.7 million 9% 3% Market Risk Premium Using the above data, what is the present value of all FCF? Don't forget that in applying the growing perpetuity formula, you have to use not this year's FCF, but next period's FCF (multiply this period's FCF by (1 + growth rate of FCF). 6.3% Your answer should be in $millions. For example, if your answer is $7.34 million, then enter 7.34 in the answer box.Use the information below to calculate WACC given the Market Capitalization of the company: Market Cap = 193.2 Million EBIT = 17.2 Million Depreciation = 4.2 Million Capital Expenditures = - 3.8 Million Change in W/C = 2.1 Million growth = 7% FCF = ? WACC = ?
- Determining PB Ratio for Companies with Different Returns and Growth Assume that the present value of expected ROPI follows a perpetuity with growth g (Value = Amount/ [r - g]). Determine the theoretically correct PB ratio for each of the following companies A and B. Note: NOPAT = NOA » RNOA. Company Net Operating Assets Equity RNOA ROE Weighted Avg. Cost of Capital Growth Rate in ROPI $100 $100 19% 19% 10% 2% $100 $100 12% 12% 10% 4% A B Round answers to two decimal places. PB Ratio Company A Company BXYZ company has the following expected cash flows for three scenarios that could occur: Recession Expected Expansion (prob. = .2) (prob. = .5) (prob. =.3) EBIT $10,000 $20,000 $30,000 MV Assets ______ ______ ______ (a) Complete the table above if the company is 100% equity financed and the non-levered return on equity is expected to be 12% (b) If the company pays tax at a 30% rate and it wants to recapitalize (debt for equity swap) to save on taxes, what is the most debt the company can add (at a 6% rate) so that it will never go bankrupt under the above scenarios? (Assume the company goes bankrupty if EBIT < Interest owed) (c) Calculate the WACC for the unlevered case and for the result in part (b). (d) What is the market value of the assets if the firm chooses the debt level in part (b)? (e) If further analysis suggests that the…Assuming a cost of capital of 5% and that $60,000 is the correct profit estimate each year for the next 10 years, what is the IRR if NPV=463,304 a. 32.0% b. 8.1% c. 21.0% d. 2.8%
- Only need answers for parts d) and e). Please include calculations. XYZ company has the following expected cash flows for three scenarios that could occur: Recession Expected Expansion (prob. = .2) (prob. = .5) (prob. =.3) EBIT $10,000 $20,000 $30,000 MV Assets ______ (a) Complete the table above if the company is 100% equity financed, it pays taxes at 30%, the non-levered return on equity is expected to be 12%, the constant growth rate (g) is 5%, and overall firm value is calculated based on the expected after-tax cash flows (b) If the company wants to recapitalize (debt for equity swap) to save on taxes, what is the most debt the company can add (at a 6% rate) so that it will never go bankrupt under the above scenarios? (Assume the company goes bankrupt if EBIT < Interest owed) (c) Calculate the WACC for the unlevered case and for the…You are evaluating a prospective LBO investment and determine that the Year 5 free cash flow (FCF) estimate is $850 million. Additionally, based on related work you estimate that the appropriate discount rate is 8.5% and the long term growth rate is 3.5%. Based on the perpetuity growth method, the Terminal Value of the company is _________ in Year Group of answer choices a. $17.6 bn, year 5 b. $17.0 bn, year 6 c. $10.0 bn, year 5 d. $17.6 bn, year 6You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital Earnings before interest, taxes, depreciation, amortion (EBITDA) Depreciation Pretax profit Tax at 30% Investment $ 78 38 40 12 14 Year a. Total value b. Laputa's equity 2 $98 48 50 15 17 $ 113 53 60 18 20 $118 58 60 18 22 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year 4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 13%, its debt yields 9%, and it pays corporate tax at 30% a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.
- Estimate a Venture's Constant Growth Rate (g) based on the following information: Terminal Value = $400,000; current year's Net Income = $20,000; next year's %3D Expected Cash Flow = $25,000; and a Required Rate of %3D Return of 20%. A. 2% В. 4% С. 6% D. 8% E. 10% O B O A OD O EYoung & Liu Inc.'s free cash flow during the just-ended year (t = o) was $100 million, and FCF is expected to grow at a constant rate of 5% in the future. If the weighted average cost of capital is 15%, what is the firm's value of operations, in millions? a. $998 O b. $1,050 Oc$1,158 Od. $948 Oe. $1,103Value in Valuation, Inc. is assessing the value of two companies, Company A and Company B, which projects average net cashflows in the next five years of P4,000,000 and 3,000,000, respectively. The required rate of return is both 8%. Which of the following has the higher equity value and by how much? And assuming that Company A is being sold at P48,000,000 while Company B is being sold at P36,500,000, what should be Value in Valuation’s best recommendation among the following choices: 1. To buy Company A because the selling price is higher than its equity value 2. To buy Company A because it is being sold at a discount of P2,000,000 3. To buy Company B because the selling price is lower than its equity value 4. To buy Company B because it is being sold at a premium of P1,000,000
