600000-100000-90000 =410000 (13-2) Value of Operations of Constant Growth Firm EMC Corporation has never paid a dividend. Its current free cash flow of $400‚000 is expected to grow at a constant rate of 5%. The weighted average cost of capital is WACC = 12%. Calculate EMC’s value o $6‚000‚000 (400000*1.05)/(.12-.05) (13-3) Horizon Value Current and projected free cash flows for Radell Global Operations are shown below. Growth is expected to be constant after 2012‚ and the weighted average cost of
Premium Weighted average cost of capital Free cash flow Dividend yield
further valuate Calaveras Vineyards. Sales increased from $2.4 million in 1990 to $2.8 million in 1991. In 1992 Calaveras started to produce premium wines with increasing average industry prices. Although sales decreased from 1992 to 1993‚ cash flow improved immensely. Increasing the average price‚ and introducing premium wines‚ allowed Calaveras to gain a higher profit margin. Based on the pro forma historical financial statements‚ a comparative analysis has been completed to identify Calaveras’
Premium Generally Accepted Accounting Principles Income statement Cash flow
414) x 11.09% + 2‚965‚414/(16‚474‚521+2‚965‚414) x 8.68% x (1-34%) WACC = 10.3% Thus estimated WACC including the tax benefits from the shield is subsequently used to discount company’s free cash flows (FCF). [pic] Numerous assumptions are set in the process of calculating Netscape’s free cash flows. First we make a forecast about Netscape’s revenue growth for the entire period from 1995 to 2005 as we have based our assumption on the specific characteristic of the industry‚ company’s
Premium Stock market Weighted average cost of capital Generally Accepted Accounting Principles
In particular‚ the following issues must be considered: Valuation of cash flows in the relevant period Estimating terminal value A. Procedure 1. The cash flows (without synergy) were taken as provided for 5 years along with adjustment for Net working capital changes. 2. WACC was calculated for various D/V ratios 3. Terminal Value of the firm was determined using P/E Multiple of 19.1 4. Valuation done for the cash flows and terminal value at a discount rate corresponding to industry average D/V
Premium Free cash flow Fundamental analysis Discounted cash flow
Dividends are the cash flows that investors receive from dividend paying stocks. Managers think of cash dividends as being paid out of earnings. As such‚ the dividend discount model is equivalent to an earnings model. Predictive value is a major argument for the relevance of accounting information‚ and earnings appear to have value in predicting future dividends. Since the value of a stock is equal to the present value of the expected future dividends‚ earnings can be seen to play an important role
Premium Free cash flow Income Income statement
Discussion and Analysis of Financial Condition and Results of Operations 30 Consolidated Statements of Income 31 Consolidated Balance Sheets 32 Consolidated Statements of Shareholders’ Equity 33 Consolidated Statements of Cash Flows 34 Notes to Consolidated Financial Statements 52 Report of Independent Registered Public Accounting Firm 53 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting Thomas M. Schoewe
Premium Generally Accepted Accounting Principles Free cash flow Balance sheet
Introduction Timken Company was the leader in Bearings Industry‚ however lately the revenues had been declining owing to its cyclical nature and decreased demand for bearings. Timken was facing increased competition from Europe and Japan who were the leading manufacturers of ball bearings. To fight these imports Timken decided to pursue the strategy of bundling where in it could add additional products and services to its products and provide more value to its customers. Timken then started a companywide
Premium Free cash flow Credit rating Cash flow
Valuation of AirThread The valuation of Air Thread is intended to present to it’s potential acquirer‚ American Cable Communication (ACC) for consultation on decision of acquisition purpose. According to the case study‚ American Cable communications is a large and healthy cable operator which provides the services and products that related to internet‚ video and landline telephony. The demand of the ACC is high in America as for instance‚ there are around 48.5 million households installed the ACC
Premium Discounted cash flow Fundamental analysis Wireless
How much was its net cash flow? a. $3‚284.75 b. $3‚457.63 c. $3‚639.61 d. $3‚831.17 e. $4‚032.81 12. Wells Water Systems recently reported $8‚250 of sales‚ $4‚500 of operating costs other than depreciation‚ and $950 of depreciation. The company had no amortization charges‚ it had $3‚250 of outstanding bonds that carry a 6.75% interest rate‚ and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate sales and cash flows in the future‚ the firm was
Premium Generally Accepted Accounting Principles Free cash flow Depreciation
Mercury would be profitable and at what maximize price could AGI offer in order to acquire the division. Analysis In order to achieve the above set goal‚ Liedtke needs to analyze the financial data from 2006 to 2011 (Exhibit 6 and 7)‚ and calculate free cash flows. This data will enable him to identify the strengths and weaknesses of this acquisition. Following is the snapshot of AGI and Mercury operations based on year 2006‚ the last year before AGI plans to acquire Mercury. Active Gear‚ Inc Mercury
Premium Free cash flow Investment Operating cash flow