Tottenham

3. Compute the unlevered free cash flow and the interest tax shields from 2008 to 2012 based on estimates provided in Exhibit 1 and Exhibit 6. (3 points)

To obtain Free Cash Flow For The Firm (FCFF), I added back the D&A, less

The firm has decided to increase the debt finance component portion from 20% to 30% which is a good decision since the interest payments are 100% tax deductible. The appropriate capital structure would be to

The questions that follow and the article Comparing the Accuracy and Explainability of Dividend, Free Cash Flow, and Abnormal Earnings Equity Value Estimates will inform your completion of Milestone Three. An understanding of the models in this assignment will assist you in hypothesizing the incremental impact of a new investment project for the company. The understanding of these models will contribute to your ability to look toward the future when considering the direction of an organization. This activity is worth a total of 75 points. See the distribution of points listed before each question.

The next step was to calculate the free cash flows for the eleven-year period. In order to do so, we used to following formula: FCF = EBIT(1-tax) + depreciation - change in NWC – CapEx. From here, we used to WACC of 13.89% previously calculated, in order to find the present value of each FCF.

Moreover, after predicting the next ten-year discounted free cash flows, we were able to calculate the discounted payback period of 5.69, comparing with the arbitrary cut off point 7.87. For the arbitrary cut off point, we use the average return on equity (net income/total equity) of the past 4 years, which is -12.702%, because it is more accurate and consistent than using the ROE of 2002. Then, we assume that all the equity leaves the company at

The debt/equity ratio for Boeing is provided in exhibit 10, 0.525, from where we can infer the weights of both debt and equity.

* Determine the investment’s value without leverage, VU, by discounting its free cash flows at the

FCF is calculated as:EBIT(1-Tax Rate) + Depreciation & Amortization - Change in Net Working Capital - Capital ExpenditureIt can also be

Once the prevailing WACC rate was found, the target WACC was calculated to be 9.00%. Again the CAPM model was used but a new the required rate of return on equity needed to be calculated. Since there is a change in the capital structure an unlevered beta needed to be determined. The Hamada equation was used to unlever the beta, which had a debt to equity ratio of .70, then to re-lever it again with a debt to equity ratio of 1.5; this changed the beta from

7. Debt to capitalization = Long-term Debt in Balance Sheet / Long term debt + Net Assets in

The free cash flow method is used to gauge “a company’s cash flow beyond that necessary to grow at the current rate… [to ensure companies] make capital expenditures to continue to exist and to grow” (Drake, n.d.). Calculation of free cash flows utilizes various components, including a firm’s value, cash flow forecasts, a firm’s capital structure, the cost of capital, and/or discounted cash flows.

We are providing below the assumptions and other calculations we used while computing the WACC and the cash flows.

Among the most avant garde of Manhattan properties is the storied Hotel Chelsea, aka the Chelsea Hotel or simply the Chelsea. The 12 storied red brick ironwork 250 unit hotel located on 222 West 23 Street in Chelsea Manhattan has witnessed layers of New York's steamiest history and hosted some pretty notable residents from groundbreakers and rule-makers to the great, the good, the famous, and the infamous.

The above formula isolates free cash flows to the firm from earnings before interest and tax (EBIT). It can be noted that FCFF are after tax (1-T) but prior to interest expense. This initial overstatement of due tax is by design; the tax deductibility of interest payments will be accounted for when incorporating the after-tax cost of debt in the weighted average cost of capital (WACC) to determine the present value of free cash flows.