Question

Please help to solving these question by excel sheet and provide detail explain with the formulas. Thank you so much!

1. Why do we use free cash flows, instead of profits, when evaluating the value of a company?

2. Explain what is the WACC in simple terms, and what its role in valuation

3.   In general, describe how to estimate a company's valuation when the free cash flow are uneven the first years, but later stay constant thereafter.

THUNDERBIRD B0357 LENA BoOTH RANK IUZZOLINO SAIro SOLAR-DISCOUNTED CA SH FLOW VALUATION On a late November founder and CEO of Saito Solar, about his interest in selling the firm. Even though selling the firm had crossed his mind occasionally in the past, Mr. Saito had never seriously thought about who would be a potential buyer and how much the firm could realistically be sold for. He was excited about the interest shown by the investment bank, yet skeptical about how large the offer might be, in light of the dedining sales in recent years. Nevertheless he invited his ewo silent partners, Mr. Kenta Suzuki and Mr. Shinji Yoshida, togacher in his office to discuss this unsolicited proposal. in 2012, a boutique investment bank in Japan approached Mr. Takuya Saito, Saito Solar and the Solar Energy Industry leaic(PV) soar panel manufacturer founded by Mr. Takuya Saito in 2002. engineer for Monsanto Electronic Materials Company (MEMC), a silicon-wafer Saito Solar is a privately owned Mr. Saito worked as an d company, right after finishing graduate school in the U.S. In 2000, after several years of dismal financial results, MEMC was acquired by Texas Pacific Group, a private equity firm, for a symbolic dollar plus S150 million of credit lines. It was then that Mr. Saito decided to return to his homeland. Japan. Mr. Saito had always been intrigued by, and was a big believer in, alternative energy while he was in the U.S. He was particularly interested insolarenergy and had spent many of his leisure hours st processes of solar electricity from sunlight through photovoltaic effect, were connected clectrically, usually in a series as a module. Mukiple solar cells were then integrated into groups, all arranged on one plane, forming asolar panel. His rescarch also showed that most of the solar panels in the world were made of either mono-crystalline or polycrystalline (also alled multi-crystalline) silicon solar cells, with those made of chin-film solar celcouning for only a He understood how solar cells, clectrical devices that are used to small fraction of the overall solar market. Mr. Saito believed Japanese residential and commercial al propenies would use a lot more solar energy if solar panels were durable and cost effective. After months of extensive industry research, he determined that solar Is made of polycrystalline silicon cells would have the most potential in Japan. Polycrystalline silicon costs to produce compared to mono-crystalline because i this process, raw silicon is melted and square mold. which is then cooled and cut into perfectly square wafers, resulting in less waste. While the efficiency level is slightly lower than mono-crystalline silicon, polycrystalline silicon-based solar panels are more cost effec- tive and would be very appaling in Japan, especially to residential customers. The thin-film solar panels, while cheap to manufacture, are the least efficient in producing clectricity.' They take up four times as much space as the mono-crystalline silicon-based panels to produce the same amount of electricity, making it very impractical for Japanese residential customers. Mr. Saito spen t the next few months soliciting capital to start his As a newcomer to the solar in- dustry. he encountered many roadblocks, especially from banks and finance companies. Even though he had saved some moncy during the 20 years he worked at MEMC, it was not cnough to start a solar panel manufacturing Mathias Aarre Machlum, Which Solar Panel Type is Best? Mono- vs. Polycrystalline vs. Thin Film, June 27, 2013. Copprighe 2013 Thunderbin School of Global Mamagmenr AW righ erved This aase w prared by Profesors Lena Chees Booth and Frank Tuzzolmo for the purpose of classrom diseussion onls and ne to indicate eisher ective or ineffecie