Assignment 2

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

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

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