Firm value is defined as collective value of debt and equity

Assignment Help Financial Management
Reference no: EM131977586

Consider a firm as follows: Assume that the firm has no debt. The cashflows are received at the end of each year and are perpetual. Cost of equity capital for an unlevered firm, r0, is 20%. The first cash-flow will be received one year from today. All calculations for valuation are done today. Firm value is defined as collective value of debt and equity.

Sales = $ 500,000

Cash Costs = 360,000

Operating Income = 140,000

Tax @ 34% -47,600

Unlevered cash flow (UCF) $ 92,400

Now assume that the firm has $126,229.50 of debt.

Interest rate on debt is 10%

Find the firm value using

d) APV method

$__________.

e) FTE method

$__________.

f) WACC method

$__________.

Reference no: EM131977586

Questions Cloud

Explain the relationship between Social engineering and BYOD : Explain the relationship between Social engineering and BYOD with reference to the chapter discussion.
What rate of return will need in order to achieve goal : What rate of return will Mr. Templeton need in order to achieve this goal?
How long will it take you to pay off the balance : Assuming your interest rate is 18%, how long will it take you to pay off the balance?
Bond market and market of loanable funds : Use the figures of both bond market and market of loanable funds to illustrate effect of crisis on bond prices and interest rates of these two types of bonds.
Firm value is defined as collective value of debt and equity : All calculations for valuation are done today. Firm value is defined as collective value of debt and equity.
Fair market value on your balance sheet : Have you included all your assets at fair market value (not historical cost) on your balance sheet?
Explain business impact analysis : Explain business impact analysis.
Firm value is defined as collective value of debt and equity : All calculations for valuation are done today. Firm value is defined as collective value of debt and equity.
What is the PV of this investment and its EAR : Assume the investor requires a 9% rate of return, compounded monthly. What is the PV of this investment and its EAR?

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd