Finance

occupation 21-1 First calculate the PV of all future blossom cash prey associated with operations Free cash run next year=2.0*1.05=2.1 harbor of operations = Vops=2.1/(WACC-5%) Now set-back calculate the cost of equity =risk free mold +beta*risk premium = 5%+1.4*6%=13.4% go for measure out of equity is Vs then we have Vops = Vs+$10.82 million the onus 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 apprise of WACC,we fall, Vops=2.1/(13.4%-8.6%*10.82/Vops-5%) sack 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; rice beer in the quaternate year = $1.472 million. g = 5%; b = 1.4; rRF = 5%; rpm = 6%; wd = 30%; T = 40%; rd = 8% Vops = ? P0 = ? rsU= wdrd + wsrsL cross off: rsL was careful 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 ceiling structure is the kindred as in problem 1, the WACC is the same, although we feignt 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 Vops + value of impose shields = $44.69 + $7 .67 = $52.36 million Equity value to Harri! son= Vops Debt = $52.36 million - $10.82 million = $41.54 million or $41.54 per share since on that point are 1 million shares outstanding. Corporate Valuation trammel 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: OrderEssay.net

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