Assume that you are a consultant in PwC and you are assisting Aztek Teknoloji on an IPO. Here is the information you have at your access: the management team of Aztek Teknoloji intends to keep the debt to value ratio at 21%. At this capital structure, the debt holders will require 7% return while the stockholders will expect a return of 14%. Next year's OCF (operating cash flow-sum of depreciation and profit after tax) is expected to be $59 and Aztek Teknoloji plans to invest $21 million in plant and NWC. Both OCFS and investment expenditures are expected to expand 4% per year in perpetuity. a. Calculate the total value of Aztek Teknnoloji. Assume a tax rate of 21%. Hint: Start by calculating WACC, then discount free cash flows by the WACC. (Intermediate calculations should not be rounded. Enter your answers in millions rounded to 1 decimal place.) b. Calculate the value of the Aztek Teknoloji's equity. Assume a tax rate of 21%. Hint: The value in (a) is the value of the entire firm. To find the value of equity, you need to subtract the value of debt from the total firm value. (Intermediate calculations should not be rounded. Enter your answers in millions rounded to 1 decimal place.)
Assume that you are a consultant in PwC and you are assisting Aztek Teknoloji on an IPO. Here is the information you have at your access: the management team of Aztek Teknoloji intends to keep the debt to value ratio at 21%. At this capital structure, the debt holders will require 7% return while the stockholders will expect a return of 14%. Next year's OCF (operating cash flow-sum of depreciation and profit after tax) is expected to be $59 and Aztek Teknoloji plans to invest $21 million in plant and NWC. Both OCFS and investment expenditures are expected to expand 4% per year in perpetuity. a. Calculate the total value of Aztek Teknnoloji. Assume a tax rate of 21%. Hint: Start by calculating WACC, then discount free cash flows by the WACC. (Intermediate calculations should not be rounded. Enter your answers in millions rounded to 1 decimal place.) b. Calculate the value of the Aztek Teknoloji's equity. Assume a tax rate of 21%. Hint: The value in (a) is the value of the entire firm. To find the value of equity, you need to subtract the value of debt from the total firm value. (Intermediate calculations should not be rounded. Enter your answers in millions rounded to 1 decimal place.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Pls do fast and i will give like for sure.
Try to give solution in typed form..
Transcribed Image Text:Assume that you are a consultant in PwC and you are assisting Aztek Teknoloji on an IPO. Here is the information you have at your
access: the management team of Aztek Teknoloji intends to keep the debt to value ratio at 21%. At this capital structure, the debt
holders will require 7% return while the stockholders will expect a return of 14%. Next year's OCF (operating cash flow-sum of
depreciation and profit after tax) is expected to be $59 and Aztek Teknoloji plans to invest $21 million in plant and NWC. Both OCFs
and investment expenditures are expected to expand 4% per year in perpetuity.
a. Calculate the total value of Aztek Teknnoloji. Assume a tax rate of 21%.
Hint: Start by calculating WACC, then discount free cash flows by the WACC.
(Intermediate calculations should not be rounded. Enter your answers in millions rounded to 1 decimal place.)
b. Calculate the value of the Aztek Teknoloji's equity. Assume a tax rate of 21%.
Hint: The value in (a) is the value of the entire firm. To find the value of equity, you need to subtract the value of debt from the total firm
value.
(Intermediate calculations should not be rounded. Enter your answers in millions rounded to 1 decimal place.)
a. Total value
b. Company's equity
million
million
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 4 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education