preview

Oxford Childtime

Better Essays
Open Document

FINN4233, Financial Policy and Planning EXAM 2 TAKE-HOME QUESTION This question is due by 2:00PM on Friday , March 26, 2004. No late submissions will be considered for a grade! Students are not allowed to discuss the exam with their classmates, colleagues, friends, internet buddies, etc. prior to the submission!! The submitted answers must be your own work. Show all your work for partial credit. Important: As future financial economists, analysts, captains of industries, etc., you must be able to present your results in a clean, concise, and understandable manner. Therefore, it is your responsibility to make sure that I understand the way you interpret your work, logic, etc. Unreadable and/or unclear work will be awarded with …show more content…

Work with the following assumptions: i. EBITDA forecasts: use values given from Exhibit 8. However, I expect you to briefly comment on the “reasonableness” of those forecasts (especially given past performance and efficiency of the company’s operations), and possibly provide a simple analysis of the sensitivity of your EBITDA growth assumptions to the value of OLC. ii. Depreciation and capital expenditures: OLC assets are primarily intangible, and the proportion of fixed to total assets is very small (see Exhibit 3). Therefore, for the sake of simplicity, assume that both capital expenditures and depreciation is zero (note that even the casewriter assumes zero depreciation, since taxes are paid on EBITDA in Exhibit 8. Therefore, in this case, EBITDA=EBIT!) iii. Tax rate: 44% (Exhibit 2, Exhibit 8) iv. Assume a five-year forecast period (1998-2002) and the terminal growth of 4%. Note, however, that the market for supplemental education will likely be very competitive in the long run. v. WACC estimation: use data from Exhibit 9. Since OLC is a private company, you’ll have to use a pure-play approach using data from Exhibit 4 to estimate OLC’s beta (you are more than welcome to adjust the OLC beta up/down considering special OLC’s risks/advantages). Assume that OLC will have no debt in its capital

Get Access
Related
Get Access