You are an equity analyst at an investment bank. You have been asked to perform valuation...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You are an equity analyst at an investment bank. You have been asked to perform valuation of Novice Ltd., a company that specialises in the media industry. You have been provided with the following information. Free cash flow Cash flow to equity holders Interest expenses Effective tax rate 2012 2013 -290 0 107 0.0% 2014 -102 0 142 0.0% 2015 250 0 164 0.0% 2016 354 0 157 0.0% 2017 459 34 139 12.0% 2018 496 35 112 35.0% Other key information: 1. The valuation date is at the end of 2012. 2. Required return on levered equity is assumed to be constant at 13.3%. 3. Required return on debt is assumed to be constant at 9.0%. 4. The market value of debt, which is assumed to be the same as book value, is 1,184 million at the end of 2012. The market value of equity at the end of 2012 is 1,490 million. 5. The WACC is assumed to remain constant from 2019. 6. The effective tax rate is assumed to be constant at 35.0% from 2019. 7. Note that change in debt can be calculated as = cash flow to equity-free cash flow - after tax interest expenses. 8. Equity value in year t can be calculated as = equity value in year t-1 multiplied by required return - cash to equityholder. 9. Free cash flow is expected to grow at a constant rate of 2.0% from 2019. Using the WACC method, perform the valuation of equity for each year between 2012 and 2018 You are an equity analyst at an investment bank. You have been asked to perform valuation of Novice Ltd., a company that specialises in the media industry. You have been provided with the following information. Free cash flow Cash flow to equity holders Interest expenses Effective tax rate 2012 2013 -290 0 107 0.0% 2014 -102 0 142 0.0% 2015 250 0 164 0.0% 2016 354 0 157 0.0% 2017 459 34 139 12.0% 2018 496 35 112 35.0% Other key information: 1. The valuation date is at the end of 2012. 2. Required return on levered equity is assumed to be constant at 13.3%. 3. Required return on debt is assumed to be constant at 9.0%. 4. The market value of debt, which is assumed to be the same as book value, is 1,184 million at the end of 2012. The market value of equity at the end of 2012 is 1,490 million. 5. The WACC is assumed to remain constant from 2019. 6. The effective tax rate is assumed to be constant at 35.0% from 2019. 7. Note that change in debt can be calculated as = cash flow to equity-free cash flow - after tax interest expenses. 8. Equity value in year t can be calculated as = equity value in year t-1 multiplied by required return - cash to equityholder. 9. Free cash flow is expected to grow at a constant rate of 2.0% from 2019. Using the WACC method, perform the valuation of equity for each year between 2012 and 2018
Expert Answer:
Answer rating: 100% (QA)
2013 Calculate Free Cash Flow FCF FCF Cash Flow to Equity Holders Interest Expenses FCF 290 million 107 million FCF 397 million Calculate the Change i... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
You are the lead IT Support person for Wolfram & Hart, a software development firm that recently got a big investment from a venture capitalist. The influx of money will help the company grow its...
-
BACKGROUND You are an information analyst working for NEE. The company president has asked you to prepare a Quantitative analysis of financial, sales, and operations data to help determine which...
-
This case study on project evaluation is applicable for beginning courses in corporate finance or finance strategy. Two alternative investment options are available to evaluate. Challenges are...
-
Prepare a statement of profit or loss and other comprehensive income( year ending 31 march 2023) , and a statement of financial position as at 31 march 2023 for the Batliss Plc Bayliss Plc is a...
-
A radionuclide A1 with decay constant 1 transforms into a radionuclide A2 with decay constant 2. Assuming that at the initial moment the preparation contained only the radionuclide A1, find: (a) The...
-
a) Compare and contrast TWO (2) social engineering attacks. (4 marks) b) Which of these two social engineering attacks is more commonly encountered among businesses? Include your reasons to support...
-
Determine whether the following can be probability distributions of a random variable which can take on only the values \(1,2,3\), and 4 . (a) \(f(1)=0.19, \quad f(2)=0.27, \quad f(3)=0.27\), and...
-
Refer to the information in Exercise 10-4. Prepare a table showing depreciation and book value for each of the four years assuming double-declining-balance depreciation.
-
Sandhill Inc.'s adjusted trial balance at May 31, 2025 is shown here. Compute the retained earnings balance as of May 31. Sandhill Inc. reported net income of $10,600 during May. Account Titles Debit...
-
Tea has been in the limelight recently thanks to increasing global demand, especially in emerging economies like China and India. China, India, Kenya, and Sri Lanka are some of the largest producers...
-
Salim and Lathika Hussein have been married for two years. Salim is 47 years old; Lathika is 42 years of age. Lathika is a chartered accountant and earns a salary of $128,000. Salim is a bus driver...
-
Find the difference quotient, \(\frac{f(x+h)-f(x)}{h}\), for the functions given in Problems 39-44. \(f(x)=\frac{1}{x}\)
-
Use the vertical line test in Problems 27-32 to determine whether the curve is a function. Also state the probable domain and range. Xmin=-5 Xmax=5 Xsc)=1 Ysc1=1 Ymin= -5 Ymax=5
-
Find the difference quotient, \(\frac{f(x+h)-f(x)}{h}\), for the functions given in Problems 39-44. \(f(x)=\frac{1}{x^{2}}\)
-
Identify the curves in Problems 24-27. a. \(2 y^{2}+8 y-20 x+148=0 \quad\) b. \(9 x^{2}-6 y^{2}+18 y-23=0\) c. \(9 x^{2}+6 y^{2}+18 x-23=0\)
-
Use the vertical line test in Problems 27-32 to determine whether the curve is a function. Also state the probable domain and range. Ymin= -5 Ymax=5 Xmin=-2 Xmax=2 Xsc1=1 Ysc1=1
-
A. What is the net force acting on this object at t= 1s? B. What is the net force acting on this object at t= 7s? > The Figure shows the velocity graph of a 7.1 kg object as it moves along the x-axis...
-
The cash records of Holly Company show the following four situations. 1. The June 30 bank reconciliation indicated that deposits in transit total $720. During July, the general ledger account Cash...
-
At the beginning of the current period, Perfect Products Inc. (PPI) sold a used depreciable asset to its wholly owned subsidiary, Simply Scrumptious Ltd. (SSL), for $80,000. PPI had originally paid...
-
On December 31, 2009, Jupiter Inc. purchased all of the shares of Europa Ltd. for $4,760,000. On that date, the carrying amount of Europas identifiable net assets was $4,080,000. The carrying amount...
-
How is an acquirer identied?
-
A food processor claims that at most \(10 \%\) of her jars of instant coffee contain less coffee than claimed on the label. To test this claim, 16 jars of her instant coffee are randomly selected and...
-
Refer to Exercise 4.2. (a) Determine the cumulative probability distribution \(F(x)\). (b) Graph the probability distribution of \(f(x)\) as a bar chart and below it graph \(F(x)\). Data From...
-
Four emergency radios are available for rescue workers but one does not work properly. Two randomly selected radios are taken on a rescue mission. Let \(X\) be the number that work properly between...
Study smarter with the SolutionInn App