With an Initial Investment of a Semi Truck for $185,000 and Cash Flows for 7 Years...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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
Expert Answer:
Answer rating: 100% (QA)
The provided images contain several different questions related to finance I will address the first question concerning the calculation of Net Present ... View the full answer
Related Book For
Contemporary Business Mathematics with Canadian Applications
ISBN: 978-0134141084
11th edition
Authors: S. A. Hummelbrunner, Kelly Halliday, Ali R. Hassanlou, K. Suzanne Coombs
Posted Date:
Students also viewed these finance questions
-
Problem 3.21. If : [a,b] C R R we define the length of ([a, b]), Len(f([a, b]), as follows. 1. Define S to be all finite ordered sequences in [a, b] of the form s = {S} [a, b] where a = 50 < $1 < 82...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Consider a manufacturing project (e.g., colored bowling balls). In the first year, if demand is high (probability 60%), the expected cash flow will be 100, if demand is low (probability 40%), the...
-
Calculate e y for the following values of y: (a) y = 1 (b) y = 5 (c) y = -.5 (d) y = -2.5 (e) y = 3.1 (f) y = - I (g) y = .05 (h) y = .32 (i) y = 6.1 (j) y = -5.4
-
Figure shows a coil of N2 turns wound as shown around part of a toroid of N1 turns. The toroid inner radius is a, its outer radius is b, and its height is h. Show that the mutual inductance M for the...
-
What is meant by a "potentially responsible party"?
-
The following contingency table presents observed frequencies. Compute the expected frequencies. 1 2 3 A 13 8 27 B 18 21 35 19 13 15 D 20 17 27
-
In the thermos shown in Figure, the innermost compartment is separated from the middle container by a vacuum. There is a final shell around the thermos. This final shell is separated from the middle...
-
How News Liftsor SinksShares around the WorldThe growth of computerized trading has closely connected the stock markets in all the developed nations and many developing nations. Traders react quickly...
-
Two quality control technicians measured the surface finish of a metal part, obtaining the data in Table 4E.1. Assume that the measurements are normally distributed. (a)Test the hypothesis that the...
-
For 6 years, Al Ain Company ( AAC ) only produced one product: the basic electric kettle for boiling water. The kettle was the first on the market to have a reliability system enabling it to turn...
-
Determine whether each of the figures in Problems 30-37 will be a solution to an Instant Insanity puzzle.
-
Determine whether each of the figures in Problems 30-37 will be a solution to an Instant Insanity puzzle.
-
Find out how to configure an HTTP server so as to eliminate the 404 not found message and have a default (and hopefully friendlier) message returned instead. Decide if such a feature is part of the...
-
TCP uses a host-centric, feedback-based, window-based resource allocation model. How might TCP have been designed to use instead the following models? (a) Host-centric, feedback-based, and...
-
Problems 45-50 show scatter diagrams along with a best-fitting line. Match the best-fitting line in each with an appropriate equation named \(\mathrm{A}-\mathrm{H}\). A. \(y=0.5 x-4\) B. \(y=-0.5...
-
Robert Langdon was searching for the "secret of eternal life" in the basement of the Smithsonian Museum in Washington. He used an old Illuminati's map to complete the following path from the statue...
-
Write the statement to store the contents of the txtAge control in an Integer variable named intAge.
-
Multiplication and division. Simplify. 1. - 6m(- 4m) 2. - 4(5x)(- 3y) 3. 2a(- 3b)(- 4c)(- 1) 4. - 2(x - 2y) 5. 5(2x - 4)
-
The total average monthly cost of heat, power, and water for Sheridan Service for last year was $2010. If this year's average monthly cost is expected to increase by one-tenth over last year's...
-
Suppose you just won the first prize in a lottery. The lottery offers you two possibilities for receiving your winnings. The first option is to receive a payment of $10 000 at the end of the year,...
-
Mark Miller started his own delivery service, Miller Deliveries, on June 1,2008. The following transactions occurred during the month of June. Instructions (a) Show the effects of the previous...
-
Laura Geller started her own consulting firm, Geller Consulting, on May 1, 2008. The following transactions occurred during the month of May. Instructions (a) Show the effects of the previous...
-
On June 1, Michelle Bullock started Divine Cosmetics Co., a company that provides individual skin care treatment, by investing \($26,200\) cash in the business. Following are the assets and...
Study smarter with the SolutionInn App