on our calculation‚ the current WACC is 11.47% as of August 01‚ 2002. In this calculation‚ for the borrowing rate‚ we use 5.70% regarding Deluxe’s bond rate A from Exhibit 8. The marginal tax rate is is projected to be 38%. We use 5.41% for the risk free rate of return with respect to the 20 years U.S Treasury bond. The equity risk premium and beta are given at 6% and .85‚ respectively. Since the beginning of 2002‚ Deluxe had retired all of its long term debt‚ we calculate the total debt by adding
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PSC closures as discontinued operations. The criteria used‚ assessment period‚ presentation‚ and disclosure for this retail company will be explained in detail when applying proper GAAP. A component of an entity comprises operations and cash flows that can be clearly distinguished‚ operationally and for financial reporting purposes‚ from the rest of the entity; it may be a reportable segment or an operating segment‚ a reporting unit‚ a subsidiary‚ or an asset group in which Auto World determined
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invested capital | 2. (TCO F) Which of the following statements is correct? (Points : 5) For a project with normal cash flows‚ any change in the WACC will change both the NPV and the IRR. To find the MIRR‚ we first compound cash flows at the regular IRR to find the TV‚ and then we discount the TV at the WACC to find the PV. The NPV and IRR methods both assume that cash flows can be reinvested at the WACC. However‚ the MIRR method assumes reinvestment at the MIRR itself. If two projects have the
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calculated between the years 2006 to 2007 and the total was 7.72%. It increased by 1% for every year thereafter. But with an increasing working capital and variable costs‚ the increase in sales growth is not enough for Strong Tie to produce enough free cash flow to withstand its increasing costs. CATO | | -3319.73 | -3884.50 | -4551.92 | Gross debt | 1145.00 | 4064.73 | 7549.23 | 11701.15 | t | 0.30 | | | | v | 0.82 | | | | w | 0.35 | | | | c | 1.17 | | | | F | 3130.00 |
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Note: This case assumes that Jell-O would realize losses with or without the Chiffon project; however‚ a review of this case suggests the opposite. Actually‚ Jell-O would grow and the cost of the agglomerator should be included as an incremental cash flow. Problem Statement In 1967‚ General Foods (GF) was contemplating the launch of a new product line - Chiffon. As one of the market leaders in the food business‚ the company was focused on increasing and protecting its current market share in the
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Q.1: Joint Venture organization 1. From the bottler’s perspective A)Corporate governance • I would require the concentrate producer to purchase a minority share in the company that would ideally be 49% . This is because the more shares the producer buys‚ the more growth and profit margins I expect to have. This was seen with the Gallardo-PepsiCo joint venture expectations. Plus‚ I would like to name more directors than the producer. • As we have seen in the text‚ concentrate producers and bottlers
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1% and its marginal tax rate is 35%. a. What is Lucent’s WACC? b. If Lucent maintains a constant debt‐equity ratio‚ what is the value of a project with average risk and the following expected free cash flows? c. If Lucent maintains its debt‐equity ratio‚ what is the debt capacity of the project in part (b)? part (b)? d. What is the free cash flow to equity for this project? e. What is its NPV computed using the FTE method? How does it compare with the NPV based on the WACC method? © 2011 Dr. Tanja Kirn – University of Liechtenstein –
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million to support its operating activities. However‚ the change of operating NWC is assumed to be zero. Calculation To calculate the external financing needs during the period 1983-1990‚ we need to calculate the net cash flow from operation (i.e. the free cash flow minus after tax-interest paid). Along with the cash at the beginning of the year and the required minimum cash balance‚ we can get the external financing need for each year. See detailed calculation in Exhibit 1. However
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Mercury Athletic Footwear Ashutosh Dash Firm Value & Cash Flow Unlevered Free Cash Flow • FCF = EBIT (1-t) + DEP - ∆NWC - CAPEX Or • FCF = EBIT (1-t) - ∆NFA - ∆NWC • EBIT (1-t) or NOPAT is debt free income • Where do we pick up the interest tax shield? • Estimating FCF requires – Developing a reorganized Balance Sheet A Complex Reorganized Balance Sheet Assets Excess Cash NWC Liabilities 000 Debt 104117 Others 000 000 NFA (PPE) 32618 Hybrids Others 77332 Equity 214067 214067 Capital
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Questions: 1. Are the financial statements in Exhibit 3.7 consistent with V. Dourtan assumptions in Exhibit 3.1? 2. What’s is the most relevant valuation model‚ APV or Present Value? 3. How are multi-currency cash flows‚ currency risk and political risk being taken into account in our valuation model? 4. What is the relevant cost of capital for Jersey? For R.T. Nakit? Can they be different? Why? 5. What is the Dinar (Pound) value of the joint venture R.T. Nakit (jersey)? What are the project’s value
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