# Valuation Quiz Essay

1381 Words6 Pages
Question 1

Palm &amp; Sun's (PS) free cash flows are expected to be \$200 million next year and \$488 million two years from now. After that, free cash flows are expected to grow at a constant rate of 3% per year forever. P&amp;S’s WACC is 11%, its cost of equity is 14% and its cost of debt is 9.5%. They have \$400 million of debt and \$78 million in cash on their balance sheet. Use the discounted cash flow model to find P&amp;S’s current equity value (rounded to the nearest million dollars).

5676 margin of error +/- 2 Question 2

Swamp &amp; Sand Industries has the following data. The discount rate is 12%. Terminal value is 3 times FCF. Cash and debt are constant. Calculate its Enterprise

3364.5 margin of error +/- 2
FCF = EBIT -Taxes +Dep -/+Chg NMC -CapEx Question 5

Calculate the terminal value of the tax shield given the following information. Assume we are calculating it for the next year. The tax rate is 30%. Debt will be \$1458 million. Assume debt grows at the same annual rate as the firm which is 7 %. The cost of debt is 4% while the cost of equity is 12%.