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Q19. An analyst has prepared the following scenarios for Schneider, Inc.:
Scenario 1 Assumptions
- Tax Rate is 40%.
- Weighted average cost of capital (WACC) = 12%.
- Constant growth rate in free cash flow = 3%.
- Last year, free cash flow to the firm (FCFF) = $30.
- Target debt ratio = 10%.
Scenario 2 Assumptions
- Tax Rate is 40%.
- Expenses before interest and taxes (EBIT), capital expenditures, and depreciation will grow at 15% for the next three years.
- After three years, the growth in EBIT will be 2%, and capital expenditure and depreciation will offset each other.
- Weighted average cost of capital (WACC) during high growth stage = 20%.
- Weighted average cost of capital (WACC) during stable growth stage = 12%.
- Target debt ratio = 10%.
|
Scenario 2 FCFF |
Year 0
(last year) |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
|
EBIT |
$15.00 |
$17.25 |
$19.84 |
$22.81 |
$23.27 |
|
Capital Expenditures |
6.00 |
6.90 |
7.94 |
9.13 |
|
|
Depreciation |
4.00 |
4.60 |
5.29 |
6.08 |
|
|
Change in Working Capital |
2.00 |
2.10 |
2.20 |
2.40 |
2.40 |
|
FCFF |
|
5.95 |
7.06 |
8.25 |
11.56 |
Given the assumptions contained in Scenario 2, what is the value of the firm?
A) $81.54.
B) $70.39.
C) $96.92.
Q20. Using the stable growth free cash flow to the firm (FCFF) model, what is the value of Quality Builders under the assumptions contained in the table below?
|
Quality Builders
Free Cash Flow to the Firm
Year 0 |
|
EBIT |
$500 |
|
Depreciation |
$200 |
|
Capital Spending |
$300 |
|
Working Capital Additions |
$30 |
|
Tax Rate |
40% |
|
Assumed Constant Growth Rate in Free Cash Flow |
5% |
|
Weighted-average Cost of Capital |
11% |
A) $6,475.00.
B) $2,975.00.
C) $2,833.33.
Q21. The following information was collected from the financial statements of Bankers Industrial Corp. for the year ended December 31, 2000.
- Earnings before interest and taxes (EBIT) = $6 million.
- Capital expenditures = $1.25 million.
- Depreciation expense = $0.63 million.
- Working capital additions = $0.59 million.
- Cost of debt = 10.5%.
- Cost of equity = 16%.
- Growth rate = 7%.
Bankers is currently operating at their target debt ratio of 40%. The firm’s tax rate is 40%.
The free cash flow to the firm (FCFF) for the current year is:
A) $3.57 million.
B) $2.39 million.
C) $2.31 million.
Q22. The appropriate discount rate used in valuing Bankers using FCFF will be:
A) 16.00%.
B) 6.30%.
C) 12.12%.
Q23. The estimated value of the firm is:
A) $37.61 million.
B) $46.68 million.
C) $49.95 million.
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发表于 2009-3-9 16:11
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