Q1:Determine the correct discount rate to value the following scenario, assuming there is no end to the timeline and the following data:
Cost of equity = 17.64%
Cost of debt = 7.38%
Debt = $577MM
Equity = $1249MM
Tax rate = 40%
Long-term growth expectations = 3.1%
Future dividends are forecast as follows:
Year 0: n/a
Year 1: 128
Year 2: 148
Year 3: 162
Year 4: 176
Year 5: 183
Enter the correct discount rate below
Answer:
(17.64) |
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Q2. Value the following scenario, assuming there is no end to the timeline and the following data:
Cost of equity = 15.23%
Cost of debt = 6.71%
Debt = $578MM
Equity = $1246MM
Tax rate = 40%
Long-term growth expectations = 3.8%
Future dividends are forecast as follows:
Year 0: n/a
Year 1: 129
Year 2: 146
Year 3: 165
Year 4: 176
Year 5: 182
(Round your answer to the nearest cent)
Answer:
(1332.73) |
Q3. Predict the cash flow for year 10 based on the growth of the following annual cash flows:
Year 1: 11,000
Year 2: 11,578
Year 3: 12,185
Year 4: 12,825
Year 5: 13,498
(Round your answer to the nearest whole dollar)
Answer:
(17433) Q4. Use the data below to compute 2014 Tax Rate:
Answer:
Q5. Use the data below to compute 2014 OCF (Operating Cash Flow):
(Round to the nearest whole dollar) Answer:
Use the data below to compute the change in NOWC (Net Operating Working Capital)
(Round to the nearest whole dollar) Answer:
Use the data below to compute the change in Gross Fixed Assets (i.e. Change in Gross property, plant & equipment)
(Round to the nearest whole dollar) Answer:
Use the data below to compute 2014 FCF (Free Cash Flow):
(Round to the nearest whole dollar) Answer:
|
1) After tax cost of debt
=7.38%(1-tax rate)
=7.38%(1-0.4)
=7.38%(0.6)
=4.428%
Statement showing WACC
Source of capital | Amount | Weight | K | WACC |
Equity | 1249 | 68.40% | 17.64% | 12.066% |
Debt | 577 | 31.60% | 4.43% | 1.399% |
1826 | 13.465% |
2) Present value pf future cash flows
Year | Cash flow | PVIF @ 13.465% | Present value |
1 | 129 | 0.881329044 | 113.691 |
2 | 146 | 0.776740884 | 113.404 |
3 | 165 | 0.684564301 | 112.953 |
4 | 176 | 0.603326401 | 106.185 |
5 | 182 | 0.53172908 | 96.775 |
P5 =
182(1.038)/13.465%-3.8% =188.916/9.665% |
195.464 | 0.53172908 | 103.934 |
Present value | 646.943 |
3) Statement showing Dividend for 10 years
Year | Cash flow |
1 | 129.00 |
2 | 146.00 |
3 | 165.00 |
4 | 176.00 |
5 | 182.00 |
6 | 188.92 |
7 | 196.09 |
8 | 203.55 |
9 | 211.28 |
10 | 219.31 |
4) Statement showing Tax rate
Particulars | Amount |
Net income | 254 |
Add: tax | 82 |
PBT | 336 |
Tax | 82 |
% of tax(82/336) | 24.4% |
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