coursework_2018.pdf - ADVANCED CORPORATE FINANCE COURSEWORK...

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ADVANCED CORPORATE FINANCE - COURSEWORK SPRING 2018 Due: upload on moodle a PDF file with answers by 12 March 2018 (12pm) Instructions: Read the case with attention. You may have to transfer into excel some of the information in the Exhibits. Answer all questions in the (word) document. Copy any excel spreadsheets you may produce into the document's appendix. Do not upload the actual excel file. Explain carefully all you do. There is no page limit but I expect you would not need more than 5 pages plus appendix. Good luck! Make any assumption you feel it is needed. I will not answer to questions.
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CASE QUESTIONS It is essential that you state and explain clearly, even if briefly, the assumptions you are making. IPO stage (31/12/1995) 1) What is the WACC at the IPO stage? Explain carefully your assumptions. [Assume that the comparables in Exhibit 3 are appropriate for HartCo. The 20-year government yield was 6% and the market risk premium was also 6%] 2) What is the enterprise value of HartCo at the IPO stage using the projections Exhibit 1 and the WACC computed in question 1)? [Copy the excel spreadsheet into your word file.] 3) What is the enterprise value of HartCo using the multiples provided in Exhibit 3 and how does it compare with 2)? Briefly discuss. Performance after the IPO 4) How does the actual performance (in Exhibit 2a and 2b) compare with the Proforma projections in Exhibit 1? Briefly discuss. Sale (as of 31/12/1998) 5) What would be the enterprise value of HartCo using the multiples in Exhibit 3? 6) What would be the enterprise value of HartCo using the CCF valuation model? [Use the projections in Exhibit 4. Explain all assumptions. The 5-year government yield is 5% and the market risk premium is 6%. Assume an exit at the end of 2003 with a sale at 4x EV/EBITDA multiple] 7) Briefly discuss the differences between the valuations 5) and 6), and their relative pros and cons in this context. Refinancing (as of 31/12/1998) 8) Using the Cash Flow projections in Exhibit 4, build a debt repayment model assuming that the new loans must be repaid as quickly as possible over the next 8 years. [Assume that the firm CCF grow at 3% per year after 2003 forever.] 9) What would be the enterprise value of HartCo using the new CCF produced in 8)? [Assume as before that the 5-year government yield is 5% and the market risk premium is 6%, and that the firm CCF grow at 3% per year after 2003 forever.] Decision 10) What should the Hart family do? Compare: a.
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