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PLAGIARISM SCAN REPORT

Date 2021‐02‐19

Words 419

Characters 4127
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Value in ﴾000’s﴿ 2002 2003 2004 2005 2006 Sales 1200 2400 3900 5600 7500 EBITD 180 360 585 840 1125 Depreciation ﴾‐﴿ 200 225 250 275 300 EBIT ﴾20﴿ 135 335 565 825 Taxes @40% 8 ﴾54﴿
﴾134﴿ ﴾226﴿ ﴾330﴿ EBIAT ﴾12﴿ 81 201 339 495 Depreciation﴾+﴿ 200 225 250 275 300 Operating Cashflow 188 306 451 614 795 Capex ﴾‐﴿ ﴾300﴿ ﴾300﴿ ﴾300﴿ ﴾300﴿ ﴾300﴿ NWC﴾‐﴿ 0 0 0 0 0 Free Cash Flow
﴾FCF﴿ ﴾112﴿ 6 151 314 495 1. Value of Unlevered Firm: FCF = EBIT*﴾1‐T﴿ + Depreciation ‐Capex ‐Increase in NWC. Value of Unlevered firm = PV﴾FCF﴿+ PV﴾Terminal Value﴿ – PV﴾Investment﴿ In fully
Equity financed firm Re = Ra and Be = Ba Re = Rf+Be﴾Rm‐Rf﴿ = 5% +1.5*﴾7.2﴿ = 5+10.8 = 15.8% Terminal Value :‐ ﴾Cash flow in last year* ﴾1+g﴿﴿/r‐g﴿ = ﴾495*1.05﴿/﴾15.8%‐5%﴿ = ﴾495*1.05﴿/.108 =
519.75/.108 = 4812.5 Present value of FCF. 2002 2003 2004 2005 2006 Terminal Value FCF per year ﴾112﴿ 6 151 314 495 4812.5 Discount Factor at 15.8% .86 .74 .64 .55 .48 .48 Present Value.
PV﴾FCF﴿ ﴾96.32﴿ 4.44 96.64 172.7 237.6 2310 Total value of Fully equity financed firm ﴾Vu﴿ = ‐96.32+4.44+96.64+172.7+237.6+2310 = 2725.06 = 2725.06 – Initial Investment = 2725.06 – 1500 =
1225.06 2. Value the project using the Adjusted Present Value ﴾APV﴿ approach assuming the firm raises $750 thousand of debt to fund the project and keeps the level of debt constant in
perpetuity. According to APV method: Value of levered firm = Value of unlevered firm﴾Vu﴿ + PV﴾Tax Shield﴿ Cost of debt = 6.8% Perpetuity of Tax shield = ﴾750000*.40*6.8/6.8﴿ = 300000 Value of
levered firm. Financed with 750000k debt = 1225060 + 300000 = 1525060 3. Value the project using the Weighted Average Cost of Capital ﴾WACC﴿ approach assuming the firm maintains a
constant 25% debt‐to‐market value ratio in perpetuity. Project Equity Beta ﴾Be﴿ = [Beta Asset + ﴾Beta Asset – Beta Debt﴿﴾1‐Tc﴿D/E] =[1.5+ ﴾1.5‐.25﴿﴾1‐.4﴿*25/75] = 1.5+[1.25*.6*1/3] = 1.5+[.25] =
1.75 Project Equity Beta using CAPM Rf +Be*﴾Rm‐Rf﴿ 5%+1.75*7.2 = 5% + 12.6 = 17.6% Weighted Average Cost Of Capital ﴾WACC﴿ = ﴾D/D+E﴿*Rd*﴾1‐T﴿ + ﴾E/D+E﴿*Re = 25/100*6.8%*﴾1‐.4﴿ +
75/100*17.96% = .25*.6.8%*.6 + .75*17.6% = 14.2% 4. 2002 2003 2004 2005 2006 Terminal value Free Cash Flow ﴾FCF﴿ ﴾112﴿ 6 151 314 495 5649.457 Discount Factor .875 .766 .67 .587 .51 .51
Present value ﴾98﴿ 4.6 101.17 184.318 252.45 2881.23 Terminal Value :‐ ﴾Cash flow in last year* ﴾1+g﴿﴿/r‐g﴿ = ﴾495*1.05﴿/﴾14.2%‐5%﴿ = ﴾495*1.05﴿/.092 = 5649.457 Total value = Total FCF –
Investment = 3325.768 – 1500 =1825.768 ﴾in 000s﴿

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Title: Value the project using the Weighted Average Cost of Capital ...
3.Value the project using the Weighted Average Cost of Capital ﴾WACC﴿ approach assuming the firm maintains a constant 25% debt‐to‐market value ratio in ...
https://www.coursehero.com/file/p7k1226/Value‐the‐project‐using‐the‐Weighted‐Average‐Cost‐of‐Capital‐WACC‐approach/