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AFM 472 - Pro-Forma Assignment #4 Answers

AFM 472 - Pro-Forma Assignment #4 Answers - AFM 472...

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AFM 472: Pro-Forma Assignment #4 (100 marks) Question #1 (30 marks) a) one account ends the forecast period at a physically impossible value. i) Adjust one assumption in a related account such that the ratio of the related account to revenue is the same in 2012 to 2113 b) one material non-static account diminishes unrealistically compared to revenue, correct this account by enforcing it to be the same ratio of revenue in each year as in 2012 c) recalculate all static, non-intangible, accounts to the same ratio of revenue as in 2012 Question #2 (20 marks) Using the data in the Market Data and Bond Summary tabs: a) Calculate the Ke for the company: i) assume a 5% EMRP ii) Calculate 3 different Ke estimates, one using 15 years of data, one using 10 years of data, and one using 5 years of data b) Calculate the Kd for the company i) assume the average tax rate from 2008 - 2012 ii) Calculate 3 different Kd estimates, one using the company's credit spread over the average 10-year bond yield for the past 15 years, one using the average coupon rate for all the outstanding debt, and one using the coupon rate on the most recent bond issue c) Calculate three estimates of the company's WACC combining the first, second, and third estimates from a) and b) respectively and the company's capital structure from 2012 Question #3 (6 marks) Utilizing the results from Question #1 and #2: a) calculate three terminal value estimates for the company using the year 2113 FCF: i) using a "g" value determined from the macroeconomic data spreadsheet posted on D2L ii) using the three WACC estimates from Question #2 Question #4 (20 marks) Complete the DCF valuation by: a) discounting all FCFs from 2013 to the terminal value using each of the three WACC estimates i) use the same WACC estimate for discounting as the "g" in the terminal value ii) sum the present value of each FCF estimate iii) subtract the debt outstanding and add the cash on hand in 2012, divide by the number of shares outstanding iv) Given the three valuations per share calculated above, calculate the P/E ratio for each using the valuation as the share price and the 2012 EPS as the "E" Question #5 (24 marks) Redo the financial statements from above by altering the CFF section such that 80% of each year's FCF is distributed to shareholders starting in 2013: a) half is used to repurchase shares b) half is paid as dividends Assume that the share price in each year is 16x EPS, recalculate the number of shares outstanding each year given the repurchases, and the new EPS and share price Given the amount paid in dividends and the new shares outstanding and price each year, calculate the dividends per share and the dividend yield Starting with the results of Assignments #1 - #3, as per the Financial Statements tab, refine the financial statements by fixing the following errors: The Balance Sheet must balance, and there must not be any hard entered accounts used to achieve the balance
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Income Statement 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 2053 2054 2055 2056 2057 2058 2059 2060 2061 2062 2063 2064 2065 2066 2067 2068 2069 2070 2071 2072 2073 2074 2075 2076 2077 2078 2079 2080 2081 2082 2083 2084 2085 2086 2087 2088 2089
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