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- You are a senior financial analyst of a firm based in Sydney. You have been assigned with the task of training interns who recently joined your firm on how to use the free cash flow model to estimate the value of a company. You have collected data on the following data: Year 2020 2021 2022 2023 2024 Long-term Debt ($M) 56000 57,000 57,000 58,000 60,000 Profits (SM, after tax) 22,000 28,000 26,000 32,000 35,000 Interest ($M, after tax) 1,900 1,950 2,050 2,150 2,275 Working Cap (SM) 20,000 19,000 22,000 30,000 28,000 Depreciation (SM) 36,000 37,000 38,000 38,000 40,000 Cap Spending ($M) 35,150 37,000 41,000 45,000 Cost of equity 0.10 0.11 0.09 0.11 WACC 0.12 0.13 0.13 0.12 Number of equity shares (Million) 3,000 Terminal growth rate 0.06 Using the information you have collected above, perform calculations to explain to interns as to how the following are calculated: i. Free cash flow to firm ii. Free cash to equity iii. method Value of the firm according to the free cash flow to firm…Imagineering, Inc., is considering an investment in CAD-CAM compatible design software with the cash flow profile shown in the table below. Imagineering’s MARR is 18%/year. Solve, a. What is the future worth of this investment? b. What is the decision rule for judging the attractiveness of investments based on future worth? c. Should Imagineering invest?(This question has two parts.) It is 2022. You are investigating the possibility of making an equity investment in Walkerville Woodworking Inc., a firm that specializes in producing antique-style furniture with a modern twist. Your research has revealed the following information: • Walkerville has $8 million in excess cash and $4.5 million in debt. • The company is expected to have free cash flow of $28 million in 2023 and $35 million in 2024. • Beyond 2024, free cash flow is expected to grow at a constant rate of 2% per year forever. • Walkerville's weighted average cost of capital (WACC) is 11% and it has 9 million shares outstanding. Question Ax What is the current enterprise value of Walkerville Woodworking given the above assumptions? OA. $375.58 million OB. $349 14 million OC. $4141 million OD. $379.08 million OE. $340.86 million Question B What should be the price of one share of Walkerville stock? OA. $46.40 OB. $41.34 OC. $42.12
- Suppose your company wants to place an investment with a private equity firm with an amount of Php 200,000 for 2021. Considering all the risks involved, the prevailing discount rate is 12% and with a revenue stream/dividends below. Should the company invest? Why or why not? Year Cash flow 2022 5,000.00 2023 6,000.00 2024 7,000.00 2025 8,000.00 2026 9,000.00 2027 10,000.00 2028 11,000.00 Determine the following: a. NPV for the period 2022 through 2028; b. Total NPV using manual computation; c. Total NPV using the Excel function; and d. IRR rate.You are considering investing in a start up company. The founder asked you for $210,000 today and you expect to get $1,070,000 in 11 years. Given the riskiness of the investment opportunity, your cost of capital is 28%. What is the NPV of the investment opportunity? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. What is the NPV of the investment opportunity? The NPV of the investment is $ (Round to the nearest dollar.) Should you undertake the investment opportunity? Since the NPV is the deal! (Select from the drop-down menus.) Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. The IRR is%. (Round to two decimal places.) The maximum deviation allowable in the cost of capital is%. (Round to two decimal places.) www you shouldAssume your organization wishes to make a Php 200,000 investment with a private equity firm in 2021. Taking into account all of the risks, the current discount rate is 12%, and the revenue stream/dividends are as follows: 2022 50002023 60002024 70002025 80002026 90002027 100002028 11000 Determine the following: DO IT IN EXCELa. NPV for the period 2022 through 2028;b. Total NPV using manual computation;c. Total NPV using the Excel function; andd. IRR rate.
- Assume your organization wishes to make a Php 200,000 investment with a private equity firm in 2021. Taking into account all of the risks, the current discount rate is 12%, and the revenue stream/dividends are as follows: 2022 50002023 60002024 70002025 80002026 90002027 100002028 11000 Determine the following:a. NPV for the period 2022 through 2028;b. Total NPV using manual computation;c. Total NPV using the Excel function; andd. IRR rate.Rachel the chief financial officer of sunrise fruit snakcs, needed to determine the compnays projected cost of capital for next year, to do so , wshe needed to know the following infomraiont expect a) the proejcted equity level for next year b) the projected intereset rate on next years debt The projected debt level for next year D0 the projected cash balance for next yearYou are considering investing in a start up company. The founder asked you for $200,000 today and you expect to get $1,000,000 in 9 years. Given the riskiness of the investment opportunity, your cost of capital is 20%. What is the NPV of the investment opportunity? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.
- 1. A company is considering investing in a project. The future perpetual cash flow is either $750K if the market goes up or $125K if the market goes down next year. The objective probability the market will go up is 20%. The appropriate risk-adjusted rate of return (cost of capital) is 25%. The initial capital investment required at time 0 is $1200K. а. Should the company invest in this project? b. Upon closer inspection the CFO realizes the company actually has some flexibility in managing this project. Specifically, if the market goes down, the company can abandon the project, and liquidate its original capital investment for 75% of its original value. If, however, the market should go up, the company could expand operations, which would result in twice the original PV of the cash flows. To expand the company will have to make an additional capital expenditure of $800K. The CFO wants to know if the company should now proceed with the project with the added flexibilities, and asks…You are considering investing in a start up company. The founder asked you for $290,000 today and you expect to get $980,000 in 8 years. Given the riskiness of the investment opportunity, your cost of capital is 25%. What is the NPV of the investment opportunity? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged.You are considering investing in a start up company. The founder asked you for $260,000 today and you expect to get $1,040,000 in 13 years. Given the riskiness of the investment opportunity, your cost of capital is 21%. What is the NPV of the investment opportunity? Should you undertake the investment opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. What is the NPV of the investment opportunity? The NPV of the investment is $ (Round to the nearest dollar.) Should you undertake the investment opportunity? Since the NPV is the deal! (Select from the drop-down menus.) Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. The IRR is%. (Round to two decimal places.) The maximum deviation allowable in the cost of capital is %. (Round to two decimal places.) you should