Finance Notes
Assignment No 1 (To be handed in Week 2)
See course package: Investment Analysis and Lockheed
Tri Star
Assignment No 2 (To be handed in Week 3)
QUESTIONS FOR MRC CORPORATION
l
'
What is the value today (end 1960) of American Rayon, assuming that the terminal value (in 1967) of the company's operating assets is equal to the book value of its invested operating capital (PPE + WCR) in 1967?
Do you agree with this assumption and can you provide some better alternatives discussed in class?
2'
depreciation to keep revenues constant at $ 55 m.
What is the value of American Rayon, if MRC takes it over and improves the company as follows: sales after 1963 don't fall but remain at a level of $ 55 m "forever,, and other value drivers such as margins, tax tates, WCR/sales ratios, as well as capex and depreciation remain the same until 1967. Afterwards, the company will have to invesi un u-ount of $ 3m equal to
3'
What is the value of American Rayon if MRC buys the company, and liquidates it assuming that, by the end of 1961 it can (a) recover the working capitaT, uúi has to'scraf ãtt n^.c assets at fu) zero valte?
Note
a. Discount rate is 20%o b. Assume forecasts in exhibit 6 are forecasts of operating cash flows c' only (see exhibit 4) is àvailaule to estimate WCR/Sales ratio (do not include urities under operating cash to calculate wCR, it as value of "ãrr.i¿.. ts) d' For the class discussion you should be prepared to explain your valuation estimates e. Consider'Other' Assets of $125 000 as non-operatingãssets and ignore them
1 U' non-ope
2
6
University of Chicago
-
"45'1415: Summer 201 3 - Corporation Finance,,
Assignment No 3 (To be handed in Week 7)
1. You have a project that requires an inve off either $6m or $2m next year with e using debt, However, your lenders believ namely $lOm or $0m, again with equal pr rate is (a)
0olo.
If you issue$3m of straight debt, what is the fair face value according to
See course package: Investment Analysis and Lockheed
Tri Star
Assignment No 2 (To be handed in Week 3)
QUESTIONS FOR MRC CORPORATION
l
'
What is the value today (end 1960) of American Rayon, assuming that the terminal value (in 1967) of the company's operating assets is equal to the book value of its invested operating capital (PPE + WCR) in 1967?
Do you agree with this assumption and can you provide some better alternatives discussed in class?
2'
depreciation to keep revenues constant at $ 55 m.
What is the value of American Rayon, if MRC takes it over and improves the company as follows: sales after 1963 don't fall but remain at a level of $ 55 m "forever,, and other value drivers such as margins, tax tates, WCR/sales ratios, as well as capex and depreciation remain the same until 1967. Afterwards, the company will have to invesi un u-ount of $ 3m equal to
3'
What is the value of American Rayon if MRC buys the company, and liquidates it assuming that, by the end of 1961 it can (a) recover the working capitaT, uúi has to'scraf ãtt n^.c assets at fu) zero valte?
Note
a. Discount rate is 20%o b. Assume forecasts in exhibit 6 are forecasts of operating cash flows c' only (see exhibit 4) is àvailaule to estimate WCR/Sales ratio (do not include urities under operating cash to calculate wCR, it as value of "ãrr.i¿.. ts) d' For the class discussion you should be prepared to explain your valuation estimates e. Consider'Other' Assets of $125 000 as non-operatingãssets and ignore them
1 U' non-ope
2
6
University of Chicago
-
"45'1415: Summer 201 3 - Corporation Finance,,
Assignment No 3 (To be handed in Week 7)
1. You have a project that requires an inve off either $6m or $2m next year with e using debt, However, your lenders believ namely $lOm or $0m, again with equal pr rate is (a)
0olo.
If you issue$3m of straight debt, what is the fair face value according to