You are a senior financial analyst of a firm based in Sydney. You have been assigned with the task of training interns who recently joined your firm on how to use the free cas low model to estimate the value of a company. You have collected data on the following data: Year 2020 2021 2022 2023 2024 Long-term Debt (SM) 56000 57,000 57,000 58,000 60,000 Profits (SM, after tax) 22,000 28,000 26,000 32,000 35,000 Interest (SM, after tax) 1,900 1,950 2,050 2,150 2,275 Working Cap (SM) 20,000 19,000 22,000 30,000 28.000 Depreciation (SM) 36,000 37,000 38,000 38,000 40.000 Cap Spending (SM) 35,150 37,000 41,000 45,000 Cost of equity 0.10 0.11 0.09 0.11 WACC 0.12 0.13 0.13 0.12 Number of equity shares (Million) 3,000 Terminal growth rate 0.06 Using the information you have collected above, perform calculations to explain to interns as to how the following are calculated: Free cash to equity i. iii. method Free cash flow to firm ii. Value of the firm according to the free cash flow to firm method iv. Value of the firm according to the free cash flow to equity V. Estimated price of an equity share according to the free cash flow to firm method and the free cash flow to equity method

You are a senior financial analyst of a firm based in Sydney. You have been assigned with the task of training interns who recently joined your firm on how to use the free cas low model to estimate the value of a company. You have collected data on the following data: Year 2020 2021 2022 2023 2024 Long-term Debt (SM) 56000 57,000 57,000 58,000 60,000 Profits (SM, after tax) 22,000 28,000 26,000 32,000 35,000 Interest (SM, after tax) 1,900 1,950 2,050 2,150 2,275 Working Cap (SM) 20,000 19,000 22,000 30,000 28.000 Depreciation (SM) 36,000 37,000 38,000 38,000 40.000 Cap Spending (SM) 35,150 37,000 41,000 45,000 Cost of equity 0.10 0.11 0.09 0.11 WACC 0.12 0.13 0.13 0.12 Number of equity shares (Million) 3,000 Terminal growth rate 0.06 Using the information you have collected above, perform calculations to explain to interns as to how the following are calculated: Free cash to equity i. iii. method Free cash flow to firm ii. Value of the firm according to the free cash flow to firm method iv. Value of the firm according to the free cash flow to equity V. Estimated price of an equity share according to the free cash flow to firm method and the free cash flow to equity method

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter15: Capital Structure Decisions

Section: Chapter Questions

Problem 1aM

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