Question 8 (5 points) Evershine Ltd. is a gold company and its EBITDA is highly sensitive...

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Question 8 (5 points) Evershine Ltd. is a gold company and its EBITDA is highly sensitive to the price of gold. You have collected the following data for the last four years: Year 2020 (Year 0) 2019 2018 2017 • • Average Gold Price $ per ounce 1,700 1,410 1,260 1,220 Page 5 of 8 EBITDA $mm 870 696 606 582 A regression analysis of the above shows an R-Squared of 100%. Today, the gold price is $1,745 per ounce. You are valuing Evershine based on the following: The valuation is to be based on today's gold price. Depreciation = 10% of the year 's NOPAT. NOPAT, will grow at a constant rate of 2% p.a. forever. Normalized ROIC = 12%. WACC = 8%. Tax rate = 25%. At the end of 2020 (Year 0), Evershine had cash of $250 million and bank loans (floating rate) of $670 million. Issued capital (dual class structure): 180 million of "A" shares with par value of $25 per share, and 80 million of "B" shares with par value of $100 per share. (i) What is the expected EBITDA in 2021 ("EBITDA,") based on regression analysis? (1.5 points) (ii) What is the expected NOPAT in 2021 ("NOPAT₁")? (1.5 points) (iii) What is the intrinsic value per "B" share? (2 points) Question 8 (5 points) Evershine Ltd. is a gold company and its EBITDA is highly sensitive to the price of gold. You have collected the following data for the last four years: Year 2020 (Year 0) 2019 2018 2017 • • Average Gold Price $ per ounce 1,700 1,410 1,260 1,220 Page 5 of 8 EBITDA $mm 870 696 606 582 A regression analysis of the above shows an R-Squared of 100%. Today, the gold price is $1,745 per ounce. You are valuing Evershine based on the following: The valuation is to be based on today's gold price. Depreciation = 10% of the year 's NOPAT. NOPAT, will grow at a constant rate of 2% p.a. forever. Normalized ROIC = 12%. WACC = 8%. Tax rate = 25%. At the end of 2020 (Year 0), Evershine had cash of $250 million and bank loans (floating rate) of $670 million. Issued capital (dual class structure): 180 million of "A" shares with par value of $25 per share, and 80 million of "B" shares with par value of $100 per share. (i) What is the expected EBITDA in 2021 ("EBITDA,") based on regression analysis? (1.5 points) (ii) What is the expected NOPAT in 2021 ("NOPAT₁")? (1.5 points) (iii) What is the intrinsic value per "B" share? (2 points)

Answer rating: 100% (QA)

i To estimate the expected EBITDA in 2021 EBITDA based on regression analysis we can use the regression equation derived from the historical data EBIT... View the full answer