Discounted cash flow

reserves at all. As some of MW’s reserves are actually real options, the APV valuation method actually underestimates the real value of MW acquisition. If Apache defers the exploiting of the reserves, there exists a possibility for the future cash flows becoming even more valuable. For example, Apache could have more precise

but this can vary.) Typically you will use the WACC as your discount rate. Depending on the circumstances, the estimated cash flows may be available for fewer than five years, or more than five years. b. Estimate the PV of the terminal value. One estimate for the terminal value involves assuming perpetual cash flows after the initial time horizon, e.g.: i. If the cash flow after 5 years is expected to grow at a rate g for the foreseeable future: Terminal Value5 (TV5) = FCF6 /(k – g) = FCF5

similar to one used in the analysis. The average hypothetical net inflow of the sequel ($21.57M) is used to figure out the value of the state variable for the real options model. The state variable is the average hypothetical net inflow of the sequel, discounted using a WACC of 12.36% back to 1989. Discounting back to 1989 is important because this is

worth other opportunities, and this cash flow is mainly derived from further exploration. Again this can be considered as an option because if the management doesn’t chose to take this option, the stream of cash flow simply won’t exist. These options are similar to call options and Black & Scholes model can be used to find out the values of these real options. These real options estimated are generally more than the APV estimates as it accounts for the cash flows that can arise from exercising a

11.5% 11.5% Current Assets (% sales) Current Liabilities (% sales) WACC 10.83% Terminal Growth Rate 3% Cost of debt 7.17% Cost of equity 11.54% Outstanding Shares 271.5 11 DCF - Free Cash Flow Growth Method Discounted Cash Flow Calculations (In Millions) Revenue 2002 10,153.0 2003 10,813.0 2004 11,515.8 Operating Income 1,218.4 1,351.6 1,554.6 Taxes 463.0 513.6 590.8 2005 12,264.3 2006 13,000.2 2007 13

What is an IPO and why is it such a big deal? Is this a good idea for JetBlue? Explain. When a privately held company makes its stock available to the general public for the first time on a securities exchange, this is known as the company’s Initial Public Offering (IPO). The IPO can consist of an initial issue of either debt or equity. The IPO process is also referred to as a private company “going public”. There are numerous benefits associated with going public. IPO benefits include enlarging

public offers companies a plethora of opportunities that the company would not have if it were to remain as a private company. One obvious advantage companies have when they go public is the immense influx of cash that they receive from the original purchasing shareholders. This large sum of cash allows the company to grow and expand their footprint through more capital projects, hiring new talent and the like. With this equity financing, the company will not have to repay the money that it receives

reach maturity in 2010 as sales, expenses and free cash flows stabilise (Fig.1). RMAG exhibits characteristics of a high growth firm with no dividends, high risk, high CAPEX expenditures and no leverage. Furthermore, it would be inadequate to adopt the forecast horizon dictated by RMAG and Big Sur of 10 years as cash flows only breakeven in Year 8 (Fig.2).

review, case study assignment, teaching Additional notes, reading solution following chapter /15 Group Assignment guidelines Chapter 5: The Time Value of Money 1. Time Value of Money 28/6 7 28/6 Chapter 6: Discounted Cash Flows and Valuation 8 29/6 9 29/6 04.02e-BM/DH/HDCV/FU 1/2

Case 1 | Warren Buffet | Group 7 | According to the case, there are stock price changes for Berkshire Hathaway and Scottish Power plc on the day of the acquisition announcement. Also, the bid price for PacifiCorp is $9.4 billion. After knowing this announcement, Berkshire Hathaway’s Class A shares price went up and make them gained in market value $2.17 billion. In Berkshire and other investors’ point of view, After Berkshire takeover PacifiCorp, it might have a good development and future