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: 9780134141084
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 15. 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

Fleur de France has a project that will provide 20 million in revenue in 1 year. The project has a euro cost of 30 million that will be paid in 1 year. The cost of the project is certain, but the...

Why do economists hold other things constant (ceteris paribus)?

Refer to the information in Exercise 177 to answer the following requirements. Required 1. Using ABC, compute the overhead cost per unit for each product line. 2. Determine the total cost per unit...

Jason Armstrong started a business called Campus Delivery Service. After the first month of operations, the trial balance as of November 30, 20, is as shown on the next page. REQUIRED 1. Analyze...

Find the two unknown sides in this triangle. Keep 4 significant digits. x+3.10m 240mx 5.21m

The Clampett Oil Company has a tanker truck that it uses to deliver fuel to customers. The tanker has five different storage compartments with capacities to hold 2,500, 2,000, 1,500, 1,800 and 2,300...

A vibrating system consists of a mass of 4.534 kg, a spring of stiffness 35.0 N/cm, and a dashpot with a damping coefficient of 0.1243 N/cm/s Find (a) the damping factor, (b) the logarithmic...

In what ways do adaptive leaders demonstrate agility and resilience in the face of uncertainty, guiding their teams through turbulent times while fostering a culture of innovation and agility?

What does Cash in Banks represent in the Balance Sheet?

What can a FMCG company do to make its supply more competitive?

Consider a linear regression model of the form Y = a + b X + U , where U is the error and a and b are coefficients that should be estimated. Suppose that X is a binary variable ( it only takes values...

4. Nitrogen is unusual in that it can be many forms in the environment, with oxidation states III, III and V common in water and N or N(0) relatively unreactive with its triple bond. To remove...

Which of the following statements about a company's resources and capabilities is false? When a company's executive management team achieves proficient dynamic capability to modify, deepen, and...

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 onetenth 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,...

Which of the following is a discrete probability distribution? Approach In a discrete probability distribution, the sum of the probabilities must equal 1, and all probabilities must be between 0 and...

Graph the discrete probability distribution given in Table 1 from Example 2. Approach In the graph of a discrete probability distribution, the horizontal axis represents the values of the discrete...

Compute the mean of the discrete random variable given in Table 1 from Example 2. Approach Find the mean of a discrete random variable by multiplying each value of the random variable by its...
Study smarter with the SolutionInn App