P
Given
Initial cost of equipment
Project and equipment life
Salvage value of equipment
Working capital requirement
Depreciation method
Depreciation expense
Discount rate
Tax rate
Base case
Enter the given va
book here
Unit sales
Price per unit
Variable c

Crystal Ball Data
Workbook Variables
Name:
Value:
Last Var Column
Worksheet Data
Last Data Column Used
0
0
Sheet Ref
Sheet Guid
Deleted sheet count
Last row used
Data blocks
ConocoPhillips Natural Gas
Given
ConocoPhillips's Cost of Capital for project
Pro

PROBLEM 11-10
Given
Initial investment
$
Total PCs scrapped
Electronic scrap per
Gold content
Life of project
PCs scrapped per ye
Tons of scrap per yea
Current price of gold $
Cost/ton for processi $
Tax rate
Risk free rate
WACC
Growth in gold prices
Forw

PROBLEM 5-7
a. For each segment,
1. Identify a set of comparable companies that have traded equity. The criteria for "comparable" is: similar
line of business and similar size.
2. Use standard regression techniques to compute the beta of leverd equity of

PROBLEM 12-2
Given
Quantity
Price (Year 0)
P-high
P-low
Forward price
Extraction costs
Solution L
$
$
$
$
$
1000
20
25
15
20
17
= Value given in problem
= Formula/Calculation/A
= Qualitative analysis or
= Goal Seek or Solver ce
= Crystal Ball Input
= Crys

Problem 2-12
PROBLEM 2-12
Given
Machine cost
Depreciation
Annual cost savings
Machine life
Salvage value (before tax)
Tax rate
Discount rate
$
760,000
Straight line
250,000
5
30%
9%
The solution below corresponds to pa
b. of the problem. To solve for part

PROBLEM 3-4: Clayton Manufacturing Company
Given
EBITDA (Year 1)
Growth Rate in EBITDA
Initial investment
Depreciation (Straight line) over
Estimated salvage value
Tax rate
Cost of capital
$
$
$
200,000
5%
800,000
5 years
35%
12%
Solution
Years
a.
EBITDA

PROBLEM 5-10
Given
Cost of equity
Cost of debt
Tax rate
10.00%
5.00%
35.00%
Solution
a.
Project A (expand)
Up-front initial investment
Annual fixed costs
Variable costs
Contribution margin
Degree of Operating Leverage
Debt capacity
Debt to value ratio at

PROBLEM 5-4
Given
Debt Ratio (current)
Equity Ratio (current)
Cost of Debt
Market Risk Premium
Equity Beta
Debt Beta
Risk Free Rate
Corporate Tax Rate
Solution L
30.0%
70.0%
6.0%
5.25%
1.20
0.29
4.5%
35%
Solution
a. Cost of Equity
b. WACC
c.
Unlevered bet

PROBLEM 4-8
Given
December 31, 2014
Balance Sheet
Invested Capital
(Book Values)
(Market Values)
Liabilities and Owner's Capital
Current liabilities
Accounts payable
Notes payable
Other current liabilities`
Total current liabilities
Long-term debt (8.5% i

PROBLEM 8-13
Given
Exhibit P6-11.1 Income Statement and Balance Sheet values are in Thousands
XTO Energy Chesapeake
Energy
Ticker
PERIOD ENDING
Income Statement ($000)
Total Revenue
Cost of revenue
Gross Profit
Operating Expenses
Selling, general, and adm

PROBLEM 6-13
Solution
Given (refer to problem 6-12):
Balance Sheet
Cash and Marketable Securities
Accounts Receivable
Inventories
Current Assets
Net Property Plant & Equipment
Total
Accounts Payable
Short-term Debt
Current Liabilities
Long-term Debt
Total

Problem 9-4: Traditional WACC Valuation
Given
Solution Legend
Debt beta
Levered equity beta
Market Risk Premium
Risk free rate
Borrowing rate (before tax)
Number of common shares
Tax rate
0.20
1.60
5%
7%
8%
2,000
30%
= Value given in problem
= Formula/Cal

PROBLEM 6-1
Cash provided by operations (CPBO) differs from free cash flow for the following reasons:
1.
Solution Legend
= Value given in problem
= Formula/Calculation/Analysis required
= Qualitative analysis or Short answer required
= Goal Seek or Solver

Toy Co. Enterprise DCF Valuation
Valuation analysis of a strategic merger & acquisition - Mini-case
Setting:
It is January 2015 and as the Chief Executive Officer of TM Toys Inc. you are evaluating a
strategic acquisition of Toy Co. Inc. Toy Co. Inc. desi

PROBLEM 8-1
Given
Sale price
Square footage
Selling price/sq ft
Time on the market
$
$
Comp #1
240,000.00 $
2,240
107.14 $
61 days
Solution
a.
b.
c.
Average price per square foot
Estimated Value
Comp #2
265,000.00
2,145
123.54
32 days
2121 Tartar Circle
3

PROBLEM 9-1
Solution Legend
Given
Discount rate
Year 5 multiple
Debt (0)
Year
1
2
3
4
5
$
15%
5
400,000
Cash flows
$
100,000
120,000
135,000
150,000
175,000
Solution
a. Enterprise Value
b. Equity Value
874,257.01
474,257.01
= Value given in problem
= Form

Problem 2-6
PROBLEM 2-6
Given
Solution Legend
TCM Petroleum
Sales
Cost of Goods Sold
Gross Profit
Selling, General, & Administrative Expense
Operating Income Before Deprec.
Depreciation, Depletion, & Amortization
Operating Profit (NOI)
Interest Expense
No

PROBLEM 10-5
Given
EBITDA 2015
Added EBITDA
Funding need
VC's required rate
Rate on convertible debt
Term
EBITDA multiple
EBITDA growth rate
Solution Legend
#
1,000,000
5,800,000
25.0%
8.0%
5 years
5
20.0%
= Value given in problem
= Formula/Calculation/An

PROBLEM 4-9
Given
Maturity
Terms
Face value
Coupon rate
Offering price
5 years
Interest only
$
1,000
12.00%
$
800
Solution
a.
Promised YTM =
18.46%
b. (Note: the discussion of this analysis is found in the Appendix to the chapter)
Bond Rating
Caa/CCC
10 Y

PROBLEM 6-12
Solution Legend
Given (refer to problem 6-7):
Balance Sheet
Cash and Marketable Securities
Accounts Receivable
Inventories
Current Assets
Net Property Plant & Equipment
Total
Accounts Payable
Short-term Debt
Current Liabilities
Long-term Debt

FIN 630
Investment Valuation
Week 10
Titman and Martin Chapter Twelve
Managerial Flexibility and Project Valuation: Real Options
In this session we will study Real Options. Consider a project that requires an upfront
investment, while it is not known whet

Week 4
Leverage and WACC
About 25 years ago, when Japanese companies were "eating our lunch", many analysts noted that those
companies had highly leveraged capital structures - lot's of debt and little equity. Looking at the WACC
formula suggests that mor

Week 5
Dividend Discount Model
Some people think that stock prices reflect the present value of future dividends. Does this
approach make sense? How does the forecasting of growth rate on future cash flows affect this
approach of valuation? Are there impl

PROBLEM 9-2
Solution Legend
Given
Discount rate
Year 5 multiple
Debt (0)
Year
1
2
3
4
5
$
15%
6.00
2,400,000
Cash flows
$ 1,200,000
1,260,000
1,323,000
1,389,150
1,458,608
Solution
a. Enterprise Value
b. Equity Value
8,736,664.28
6,336,664.28
= Value give

PROBLEM 6-1
Cash provided by operations (CPBO) differs from free cash flow for the following reasons:
1. CPBO is measured after subtracting after-tax interest expense.
2. CPBO includes after-tax nonoperating or other income.
3. CPBO excludes consideration

Crystal Ball Data
Workbook Variables
Name:
Value:
Last Var Column
Worksheet Data
Last Data Column Used
6
Sheet Ref
Err:509
#REF!
Sheet Guid
9739094b-1f3a-4fac-bdab-7a465b2217d2
4d32f468-712e-444d-95be-c2bafe76e7aa
Deleted sheet count
Last row used
28
31
D