Compute the Adjusted Present Value The buyer wants cash flows evaluated for 20

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Compute the Adjusted Present Value. The buyer wants cash flows evaluated for 20 years and assumes a terminal value a \$50 M to be discounted at 15%. Ignore taxes. Annual cash flow from product line expansion \$ 7 M. Discount at 18%. Annual cash flow from tax savings \$ 7 M. The interest rate on debt is 6% and the tax rate is 40%. You do not need to calculate a terminal value for tax savings. Annual cas At the end of 10 years, Grokster Investments plans to sell its interest in One City Tower, an office building in Miami, FL. In year 10 the building is expected to generate an annual cash flow of \$75 million that is expected to grow at an annual rate 4% forever. The discount rate for projects such as this is 12%. Calculate the terminal value at the end of the 10th year. FCF (forecast free cash flow at end of explicit forecast period) g (steady growth rate - the long term growth) Given the following data from Swamp & Sand Industries, calculate the NI. The tax rate is 30%. ??????? ?? ?????? = (1− (1 ) +? ^( −? ))/ ? 400 SGA 313 Depreciation 119 5 NWC 15 CapEx 132 148 Dividends 20 tax rate 30% Note SGA does not include depreciation 211 Revenue-Cost of Sales - SGA - Dep - Int Expense 63 -Taxes 148 X1 X2 100 145 Ignore cash 230 241 Inventories 450 483 Payables 300 323 Debt 140 252 Ignore debt Remember a negative NWC is a source of cash and reduces the need for financing. X1 X2 NWC = assets - liabilities 380 401 21 21 TV = (D*Kd*T)/(Kd-g) Debt \$138.00 Cost of Debt 4% Tax Rate 30% 3% Terminal Value 166 Cost of Sales Revenue -Cost of Revenue - SGA - Depreciation - Interest Expense - Taxes = Net Income Interest Expense Swamp & Sand Industries has the following data. Calculate its Net Working Capital (NWC) adjustment for cash flow in year X2. Cash Receivables Receivables +Inven -Payables = NWC X2 - Chg NWC Calculate the terminal value of the tax shield given the following information. Assume we are calculating it for the next year (that is, assume there is no planning period, just a terminal value). The tax rate is 30%. Debt will be \$138 million. Assume debt grows at the same annual rate as the firm which is 3%. The cost of debt is 4% while the cost of equity is 12%. g (steady growth rate - the long term growth) Swamp & Sand Industries has the following data for the coming year. Free cash flow, cash, and debt are constant. Terminal value is 3 times FCF. The discount rate is 13%. Calculate its Enterprise Value. 133 118 FCF/1+R Cash 29 353 FCF Terminal /1+R Debt 280 471 118+353 Discount Rate 13% 471 Sales 1052 400 SGA 314 Depreciation 95 243 5 170.1 Change NWC 16 160.1 CapEx 89 Dividends 32 Note SGA does not include depreciation FCF = EBIT * (1-T) + noncash expenses - (capital expenditures + change in net working capital) EBIT (Operating Income) 338 95 T (tax rate - not the dollar amount of taxes) 30% CAPEX 89 FCF = EBIT -Taxes +Dep -Chg NWC Change in Net Working Capital 16 160 FCF Free Cash Flow Enterprise Value is the discounted value of FCF and Terminal Value. In this case since it is only one year. FCF*(1+3)/ (1+DR) Given the following data from Swamp & Sand Industries, calculate the FCF (Free Cash Flow). The tax rate is 30%.  • • • 