Problem Set 11 Checkpoints

Problem Set 11 Checkpoints - Calculate terminal value as a...

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BusM 401 Problem Set #11 Company Valuation Checkpoints 1. Refer to the following pro forma financial statements for ABC Corp. At the end of 2009 you are valuing ABC Corp. and are calculating a 2013 terminal value based on a liquidation scenario. What would the terminal value be in present value (2009) terms? Assume that the resale value of PP&E is 500 and that the appropriate discount rate is 10%. Income statement (projected) Selected balance sheet items (projected) 2013 2012 2013 Sales 2000 Current assets 500 550 COGS 1650 250 300 Operating expenses 200 Depreciation 50 Current liabilities 370 350 Interest expense 50 Earnings before taxes 50 Tax 10 Net income 40 $450.79 2. Estimate a stock price for XYZ Corporation using the following information. Free cash flows for the first three years have been projected explicitly.
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Unformatted text preview: Calculate terminal value as a growing perpetuity. Year 1 2 3 Free cash flow 100,000 103,000 106,090 $2.04 3. Do Higgins, Chapter 9, #14. In this problem you are being asked to use your judgment about calculating the right multiples, so after calculating multiples from the data, you may want to adjust them upward or downward based on Harley Davidsons performance relative to the comparables. Of course, well all make different judgment calls, so there is not going to be one right answer to this question. The important thing that you should take away from the problem is an understanding of how the process of valuation using multiples works. 4. Do Higgins, Chapter 9, #9, parts (a) through (c). Answers in the back of the book....
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