6 - intrinsic equity value of Brandco? What is the...

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EXHIBIT 6.18 BrandCo: Income Statement and Reorganized Balance Sheet $ million Income Statement Toda y Year 1 Reorganized balance sheet Today Year 1 Revenues 800.0 840.0 Operating working capital 1 70.1 73.6 Operating costs (640.0 ) (672.0 ) Property and equipment 438.4 460.3 Depreciation (40.0) (42.0) Invested capital 508.5 533.9 Operating profits 120.0 126.0 Debt 200.0 210.0 Interest (16.0) (16.0) Shareholders' equity 308.5 323.9 Earnings before taxes 104.0 110.0 Invested capital 508.5 533.9 Taxes (26.0) (27.5) Net Income 78.0 82.5 4. Assuming the market value of debt equals today’s book valye of debt, what is the
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Unformatted text preview: intrinsic equity value of Brandco? What is the intrinsic value per share? Does it differ from the share price used to determine the cost of capital weightings? Answer: Intrinsic value per share = 82.5/323.9 = 0.25 Yes, it changes with the cost of capital weights 5. what are the three components required to calculate economic profit? Determined Brandco’s economic profit in year 1? Answer: Three components of economic profit are: Invested capital x (ROIC – WACC) or NOPAT – (Invested capital x WACC) = 94 – (533.9 x 12%) = 29.93...
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This note was uploaded on 12/05/2011 for the course ACC 134 taught by Professor Erik during the Fall '11 term at Colorado.

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