Allen_Berk_DeMarzo_Problem_9-19_Start
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Subject
Finance
Date
Feb 20, 2024
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xlsx
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Uploaded by lexinallen2000
Problem 9-19
Year
1
2
3
FCF (millions)
$53
$68
$78
a.
Estimate the enterprise value of Heavy Metal.
b.
If Heavy Metal has no excess cash, debt of $300 million, and 40 million
Cost of capital
14.00%
Long-run growth rate
4.00%
Year
1
2
3
FCF (millions)
$53.00
$68.00
$78.00
Terminal value (millions)
Total cash flow (millions)
$53.00
$68.00
$78.00
a.
Estimate the enterprise value of Heavy Metal.
Enterprise value (millions)
b.
If Heavy Metal has no excess cash, debt of $300 million, and 40 million
Debt (millions)
$300.00
Complete the steps below using cell references to given data or previous c
is all you need. To copy/paste a formula across a row or down a column, a
reference may be preferred. If a specific Excel function is to be used, the d
not type in numerical data into a cell or function. Instead, make a referen
your computations only in the blue cells highlighted below. In all cases, un
appearance of the data in your formulas, usually the Given Data section.
Heavy Metal Corporation is expected to generate the following free cash flow
After then, the free cash flows are expected to grow at the industry average of
model and a weighted average cost of capital of 14%:
Number of shares (millions)
40 Equity value (millions)
Stock price
Requirements
1.
Start Excel - completed.
2.
3.
4.
5.
6.
7.
Save the workbook. Close the workbook and then exit Excel. Submit th
In cell G19
, by using cell references, calculate the terminal value of the
In cell G20
, by using cell references, calculate the total cash flow for ye
In cell D24
, by using cell references and the function NPV
, calculate th
In cell D31
, by using cell references, calculate the equity value of the co
In cell D32
, by using cell references, calculate the stock price (1 pt.)
.
4
5
$75
$82
n shares outstanding, estimate its share price.
4
5
$75.00
$82.00
n shares outstanding, estimate its share price.
calculations. In some cases, a simple cell reference an absolute cell reference or a mixed cell directions will specify the use of that function. Do nce to the cell in which the data is found. Make nless otherwise directed, use the earliest ws over the next five years:
f 4% per year. Using the discounted free cash flow
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he workbook as directed.
e company at the end of year 4 (1 pt.)
.
ear 4 (1 pt.)
.
he enterprise value of the company (1 pt.)
.
ompany (1 pt.)
.
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Question 6
Year
a. DORIAN Enterprise has developed a four-year
investment plan which is expected to generate the
following cash flows:
1 2 3 4
Cash flow GH¢ 30,000 45,000 48,000 50,000
The opportunity cost of capital is 18%. How much is this
investment worth today?
b. The financial data of DORIAN Enterprise is given as
follows:
Details
Operating income
Amount GH¢
Financial expense
275,000
47,000
Net impairment loss, gross loan portfolio 53,000
Operating expense
122,000
Gross loan portfolio
125,000
Delinquency + 1 month or more
14,000
Net subsidy
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Interest rate charged on loans = 18%
i. Compute the Subsidy Dependence Index (SDI)
ii. Compute the Operational Self Sufficiency (OSS)
iii. Compute the Portfolio at Risk (PAR) of DORIAN Ltd.
iv. What do the values computed in (a), (b) and (c) represent?
c. Below are the details of Accounts Receivable of
DORIAN Ltd.
Customer Outstanding Balance GH¢ Days outstanding
1
5,000
28
2
8,000
42
3
15,000
30
4
8,500
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5
6,000
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6
14,000
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QUESTION 19
Simkins Renovations Inc. is considering a project that has the following cash flow data. What is the
project's IRR?
Year
Cash flows
A. 28.55%
O B. 24.50%
○ C. 20.88%
O D. 17.63%
○ E. 14.67%
○ F. 11.98%
G. 9.51%
OH. 7.24%
0
-$850
1
2
3
4
$300
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$280
$270
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QUESTION 5
Your firm has net income of $343 on total sales of $1,360. Costs are $750 and depreciation is $120. The tax rate is 30 percent. The
firm does not have interest expenses. What is the operating cash flow?
$833
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$610
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$490
QUESTION 6
Seaborn Co. has identified an investment project with the following cash flows.
Year Cash Flow
$950
1,050
1
2
3
4
1,320
1,200
If the discount rate is 10 percent, what is the present value of these cash flows?
O3542.76
3578.84
3418.66
4470.00
3847.03
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Save All Answers
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QUESTION 23
Reno Company is considering a project that has the following cash flow data. What is the project's IRR?
Year
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O a. 14.05%
O b. 15.61%
OC. 17.34%
O d. 19.27%
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0
-$1,050
1
$400
2
$400
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Division
Next Period's
Expected Free
Cash
Flow ($mm)
Asset
Beta
Oil Exploration
1.4
450
Oil Refining
1.1
525
Gas & Convenience Stores
0.8
600
The risk-free rate of interest is 3% and the market risk premium is 5%.
The value of the oil exploration division is closest to:
A. $4500
B. $10,000
C. $7500
O D. $8750
Expected
Growth
Rate
4.0%
2.5%
3.0%
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None
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еВook
Problem Walk-Through
A company has a 12% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows:
1
2
3
4
5
7
Project A
-$300
-$387
-$193
-$100
$600
$600
$850
-$180
Project B
-$400
$133
$133
$133
$133
$133
$133
$0
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Problem 13: Value of a Mixed Stream
Find the present value of the streams of cash flows shown in the following table. Assume that
the firm's opportunity cost is 12%.
A
B
C
Year
Cash Flow
Year
Cash Flow
Year
1
- $2,000
1
$ 10,000
1-5
Cash Flow
$ 10,000/yr
8,000/yr
2
3,000
2-5
6-10
4,000
6
6,000
8,000
3
4
5
5,000/yr
7,000
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Vd
Subject: acounting
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Exercise 26-3 (Algo) Payback period and unequal cash flows LO P1
Beyer Company is considering buying an asset for $400,000. It is expected to produce the following net cash flows.
Year 2
$80,000
Year
Initial investment
Year 1
Year 2
Year 3
Year 4
Year 5
Total
Year 1
$80,000
Net cash flows
Compute the payback period for this investment.
Note: Cumulative net cash outflows must be entered with a minus sign. Round your Payback Period answer to 2 decimal places.
Net Cash Flows
$
(400,000)
Payback period=>
Year 3
$70,000
Cumulative Cash
Flows
Year 4
$200,000
Year 5
$15,000
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question for my
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Related Questions
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