Finance

bother 21-1 First calculate the PV of all future spate cash prey associated with operations Free cash move next year=2.0*1.05=2.1 shelter of operations = Vops=2.1/(WACC-5%) Now first-class honours degree calculate the cost of equity =risk free harness +beta*risk premium = 5%+1.4*6%=13.4% stick out attend of equity is Vs then we have Vops = Vs+$10.82 million the freightage of debt =10.82/Vops Weight of equity = Vs/Vops=(Vops-10.82)/Vops WACC=10.82/Vops*8%*(1-40%)+(Vops-10.82)/Vops*13.4%=13.4%-8.6%*10.82/Vops Substituting the rank of WACC,we attract, Vops=2.1/(13.4%-8.6%*10.82/Vops-5%) beat we get 8.4%*Vops-0.93052=2.1 Vops=36.08 Now value of equity Vs=36.08-10.82=25.26 million Problem 21 2 21-2FCF1 = $2.5 million, FCF2 = $2.9 million, FCF3 = $3.4 million, and FCF4 = $3.57 million; busy in the fourth year = $1.472 million. g = 5%; b = 1.4; rRF = 5%; revolutions per minute = 6%; wd = 30%; T = 40%; rd = 8% Vops = ? P0 = ? rsU= wdrd + wsrsL distingui sh: rsL was mensural in puzzle 1 to be 13.4% = 0.30(8%) + 0.70(13.4%) = 11.78% WACC was calculated in problem 1 to be 10.82%. Since the horizon great structure is the kindred as in problem 1, the WACC is the same, although we hold outt train WACC to apply the APV. Tax shields are TS1 = TS2 = TS3 = Interest x T = $1,500,000(0.40) = $600,000, and TS4 = $1,472,000 (0.40) = $588,800. Tax shield horizon value = TS4(1+g)/(rsU-g) = 0.5888 (1.05)/(0.1178-0.

05) = 9.12 Value of revenue enhancement shields = = $7.67 million. Unlevered horizon value = FCF4(1+g)/(rsU-g) = 3.57(1.05)/(0.1178-0.05) = 55.29 Unlevered Vops= = $44.69 Value of operations = unlevered Vop! s + value of impose shields = $44.69 + $7.67 = $52.36 million Equity value to Harrison= Vops Debt = $52.36 million - $10.82 million = $41.54 million or $41.54 per share since in that location are 1 million shares outstanding. Corporate Valuation determine Horizon Value = FCF4(1+g)/(WACC-g) = 3.57(1.05)/(0.1082 0.05) = 3.7485/(0.0582) = $64.41 million Value of...If you want to get a full essay, order it on our website: BestEssayCheap.com

If you want to get a full essay, visit our page: cheap essay