With an Initial Investment of a Semi Truck for $185,000 and Cash Flows for 7 Years...

 

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With an Initial Investment of a Semi Truck for $185,000 and Cash Flows for 7 Years and an expected residual value of the Semi Truck of $25,000 after the 7 years, What is the NPV for this Semi Truck assuming a 9% discount rate? What would be the IRR? (HINT: 7th year cash flows will be cash + residual value) Initial Investment 185,000.00 Discount Rate 9% Cash Flows NPV IRR 1.00 35,000.00 2.00 38,000.00 3.00 41,000.00 4.00 44,000.00 5.00 47,000.00 6.00 48,000.00 7.00 Residual Value 52,000.00 35,000.00 Wubz Incorporated currently carries book value of debt of 100 million and its current Market Cap of Equity is 500 million(1,000,000 shrs outstanding). THERE IS NO PREFERRED STOCK. Wubz's interest expense is on their debt is 5,000,000. Their corporate tax rate is 25%. Currently the US 10 Year Treasury bond is yielding 3.5%. The expected market return is 8.5%. Terminal Growth Rate is forecasted to be 3.5%. You must calculate the cost of equity using the CAPM using the information given above and using the UNLEVERED BETA. The equity beta is 1.3. Wubz is currently trading at $58 a share Round to 2 Decimal Corporate Tax Rate Expected Market Return Risk Free Rate Beta (Round to Nearest 1 decimal) Unlevered Equity Beta Debt Value Equity Value Cost of Debt Cost of Equity Debt Weighting Equity Weighting WACC(round to 2 decimals) Terminal Growth Rate(above) Common Stock Outstanding Year EBIT Depreciation OCF Capex Net Change in Working Capital FCF PV of FCF 1 10,250,000.00 1,025,000.00 1,250,000.00 545,000.00 2 4 3 10,875,000.00 11,277,000.00 11,848,000.00 1,087,500.00 1,127,700.00 1,184,800.00 1,300,000.00 800,000.00 1,100,000.00 350,000.00 TOTAL FIRM VALUE Debt Market Value TOTAL VALUE OF CS DCF Value Per Share Current Market Price Per Share According to your DCF valuation is Wubz's stock undervalued or overvalued? IF YOU CHANGED THE EQUITY BETA TO 1.4, what would the DCF value per G ⠀⠀ re be? 1,400,000.00 480,000.00 5 12,085,000.00 1,208,500.00 780,000.00 450,000.00 Year 6 projected FCF TV PV of TV Terminal With an Initial Investment of a Semi Truck for $185,000 and Cash Flows for 7 Years and an expected residual value of the Semi Truck of $25,000 after the 7 years, What is the NPV for this Semi Truck assuming a 9% discount rate? What would be the IRR? (HINT: 7th year cash flows will be cash + residual value) Initial Investment 185,000.00 Discount Rate 9% Cash Flows NPV IRR 1.00 35,000.00 2.00 38,000.00 3.00 41,000.00 4.00 44,000.00 5.00 47,000.00 6.00 48,000.00 7.00 Residual Value 52,000.00 35,000.00 Wubz Incorporated currently carries book value of debt of 100 million and its current Market Cap of Equity is 500 million(1,000,000 shrs outstanding). THERE IS NO PREFERRED STOCK. Wubz's interest expense is on their debt is 5,000,000. Their corporate tax rate is 25%. Currently the US 10 Year Treasury bond is yielding 3.5%. The expected market return is 8.5%. Terminal Growth Rate is forecasted to be 3.5%. You must calculate the cost of equity using the CAPM using the information given above and using the UNLEVERED BETA. The equity beta is 1.3. Wubz is currently trading at $58 a share Round to 2 Decimal Corporate Tax Rate Expected Market Return Risk Free Rate Beta (Round to Nearest 1 decimal) Unlevered Equity Beta Debt Value Equity Value Cost of Debt Cost of Equity Debt Weighting Equity Weighting WACC(round to 2 decimals) Terminal Growth Rate(above) Common Stock Outstanding Year EBIT Depreciation OCF Capex Net Change in Working Capital FCF PV of FCF 1 10,250,000.00 1,025,000.00 1,250,000.00 545,000.00 2 4 3 10,875,000.00 11,277,000.00 11,848,000.00 1,087,500.00 1,127,700.00 1,184,800.00 1,300,000.00 800,000.00 1,100,000.00 350,000.00 TOTAL FIRM VALUE Debt Market Value TOTAL VALUE OF CS DCF Value Per Share Current Market Price Per Share According to your DCF valuation is Wubz's stock undervalued or overvalued? IF YOU CHANGED THE EQUITY BETA TO 1.4, what would the DCF value per G ⠀⠀ re be? 1,400,000.00 480,000.00 5 12,085,000.00 1,208,500.00 780,000.00 450,000.00 Year 6 projected FCF TV PV of TV Terminal

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