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What is discounted cash flow analysis

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Reference no: EM131986459

Question 1: Using the assumptions for ValueCo below, determine the weighted average cost of capital for ValueCo.

Assumptions
Debt to total capitalization 50%
Cost of debt 6.00%
Tax rate 40%
Risk-free rate 0.50%
Market risk premium 5%
Size premium 2%
Unlevered beta 1.6

Question 2: Using the assumptions for ValueCo below, determine the implied share price for ValueCo.

Assumptions
Terminal Year (year 5) EBITDA 800
Exit multiple 8.5
WACC(weighted average cost of capital) 10%
Cumulative present value of free cash flow 1500
Total debt 1000
Cash and cash equivalents 200
Fully diluted shares outstanding 100

Question 3: What is discounted cash flow analysis? Analyse the benefits of using discounted cash flow analysis.

Question 4: What does accretion/dilution analysis measure? Outline the key drivers in accretion/dilution analysis.

Question 5: Briefly discuss the key drivers of IRR (Internal Rate of Return) in leveraged buyout analysis.

Verified Expert

The assignment was to calculate financial ratios and related data about an organisation named Value Co. Also, IRR and other theoretical concepts were considered for evaluating the same.

Reference no: EM131986459

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