You are a manager at an investment consulting firm. On 1/1/2017 one of your clients, a...
Problem 1: You are the potential purchase of a small financial consulting firm currently eating $45,000 of after ta sh flow. On the basis of reww of marrisk investment opportunities, you must earn a rate of return of on the proposed purchase. Because you are relatively uncertain about future cash flows, you decide to estimate the firm's value using assumptions about the growth of cash flows (ie, similar to the growth of dividends. Required: What is the firm's value cash...
Quantitative Problem 1: Assume today is December 31, 2016. Barrington Industries expects that its 2017 after-tax operating income (EBIT(1 -T)] will be $450 million and its 2017 depreciation expense will be $65 million. Barrington's 2017 gross capital expenditures are expected to be $120 million and the change in its net operating working capital for 2017 will be $30 million. The firm's free cash flow is expected to grow at a constant rate of 4.5% annually. Assume that its free cash...
Quantitative Problem 1: Assume today is December 31, 2016. Barrington Industries expects that its 2017 after-tax operating income [EBIT(1 - T)] will be $450 million and its 2017 depreciation expense will be $65 million. Barrington's 2017 gross capital expenditures are expected to be $110 million and the change in its net operating working capital for 2017 will be $20 million. The firm's free cash flow is expected to grow at a constant rate of 5% annually. Assume that its free...
You are an entrepreneur starting a biotechnology firm. If your research is successful, the technology can be sold for $33 million. If your research is unsuccessful, it will be worth nothing. To fund your research, you need to raise $2.3 million. Investors are willing to provide you with $2.3 million in initial capital in exchange for 25% of the unlevered equity in the firm. a. What is the total market value of the firm without leverage? b. Suppose you borrow...
You are an entrepreneur starting a biotechnology firm. If your research is successful, the technology can be sold for $ 27 million. If your research is unsuccessful, it will be worth nothing. To fund your research, you need to raise $5.6 million. Investors are willing to provide you with $5.6 million in initial capital in exchange for 30 % of the unlevered equity in the firm. a. What is the total market value of the firm without leverage? b. Suppose...
You are an entrepreneur starting a biotechnology firm. If your research is successful, the technology can be sold for $ 21 million. If your research is unsuccessful, it will be worth nothing. To fund your research, you need to raise $4.5 million. Investors are willing to provide you with $4.5 million in initial capital in exchange for 25 % of the unlevered equity in the firm. a. What is the total market value of the firm without leverage? b. Suppose...
You are an entrepreneur starting a biotechnology firm. If your research is successful, the technology can be sold for $22 million. If your research is unsuccessful, it will be worth nothing. To fund your research, you need to raise $5.5 million. Investors are willing to provide you with $5.5 million in initial capital in exchange for 25% of the unlevered equity in the firm. a. What is the total market value of the firm without leverage? b. Suppose you borrow...
You are an entrepreneur starting a biotechnology firm. If your research is successful, the technology can be sold for $24 million. If your research is unsuccessful, it will be worth nothing. To fund your research, you need to raise $2.4 million. Investors are willing to provide you with $2.4 million in initial capital in exchange for 50% of the unlevered equity in the firm. a. What is the total market value of the firm without leverage? b. Suppose you borrow...
You are an entrepreneur starting a biotechnology firm. If your research is successful, the technology can be sold for $ 21 million. If your research is unsuccessful, it will be worth nothing. To fund your research, you need to raise $ 5.3 million. Investors are willing to provide you with $ 5.3 million in initial capital in exchange for 45 % of the unlevered equity in the firm. a. What is the total market value of the firm without leverage?...
You are an entrepreneur starting a biotechnology firm. If your research is successful, the technology can be sold for $32 million. If your research is unsuccessful, it will be worth nothing. To fund your research, you need to raise $3.2 million. Investors are willing to provide you with $3.2 million in initial capital in exchange for 45% of the unlevered equity in the firm.a. What is the total market value of the firm without leverage?b. Suppose you borrow $0.6 million. According to MM, what fraction...