Assignment 2

# Assignment 2 - (1 WACC)^2=80,000/1.12(100,000...

This preview shows pages 1–2. Sign up to view the full content.

Sravanthi kosuri D03436570 Assignment 2: Problem 15-2: Value of operations=[Free Cash Flows (1 + growth rate)] / (WACC - growth rate) . =[\$400,000(1+0.05)]/(0.12-0.05) =\$420,000/0.07=\$6,000,000. Problem 15-6: a. After discounting the free cash flow back to year 2 ,the value of free cash flow is \$108,000 Given WACC=12%,g=8% Therefore terminal or horizon value of operations 2 op V = 08 . 0 12 . 0 000 , 108 \$ - = \$2,700,000. b.Given WACC=12%,g=8%,Terminal value of operations is \$2,700,000 So the value of brook operations will be yr1/(1+WACC) + (yr2+Vop)/

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: (1+WACC)^2=80,000/1.12+(100,000+2,700,000)/(1.12*1.12)=71,428.571+ \$2,232,142.80=\$2,303,571.30 Problem 16-11: a. BEA’s unleveled beta is b U =b L /(1+ (1-T)(D/S))=1.0/(1+(1-0.40)(20/80)) = 0.870. b. b L = b U (1 + (1-T)(D/S)). At 40 percent debt: b L = 0.87 (1 + 0.6(40%/60%)) = 1.218. r S = 6 + 1.218(4) = 10.872% c. WACC = w d r d (1-T) + w e r s = (0.4)(9%)(1-0.4) + (0.6)(10.872%) = 8.683%. V = 08683 . ) 4 . 1 )( 933 . 14 (\$ WACC ) T 1 )( EBIT ( WACC FCF-=-= = \$103.188 million....
View Full Document

{[ snackBarMessage ]}

### Page1 / 2

Assignment 2 - (1 WACC)^2=80,000/1.12(100,000...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online