You are required to perform the valuation of BJX Corp. In addition to the information contained...

  

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You are required to perform the valuation of BJX Corp. In addition to the information contained on the tables below, you know that the company long term growth rate will be a function of return on capital and reinvestment rate. The company's current market value capital structure of D/(D+E) = 40% is expected to remain unchanged for the foresseable future. Using this information and the valuation methodologies discussed in Corporate Finance II, answer the following questions: a) Calculate the Free Cash Flow for the period 2019-23 (6 points) b) Calculate the appropriate discount rate (6 points) c) Calculate the Continuing Value growth rate (6 points) d) Calculate the Enterprise Value, assuming that the 2023 free cash flow will grow at the continuing value growth rate. Apply the midyear adjustment. (6 points) e) Now assume that, after 2023, new investments will render only the cost of capital. Recalculate the enterprise value; apply the midyear adjustment. (6 points) $ million Operating Results: Service Revenue Plus: Equipment Sales Total Revenue Less: System Operating Expenses Less: Cost of Equipment Sold Less: Selling, General & Administrative EBITDA Less: Depreciation & Amortization EBIT Less: Interest Expense Plus: Equity in Earnings of Affiliates Plus: Gains (Losses) on Investments Plus: Other Income EBT Less: Taxes Income Before Minority Interest Less: Minority Interest Net Income Net Operating Working Capital Capital Expenditures Company and market data: Rf Rd Rm Tax rate D/V 2,80% 4,70% 10,00% 30% 0,40 Comparable Companies: Equity Market Value $ million Universal Mobile 177.745 Neuberger Wireless Big Country Comm Rocky Mountain W Average 30% 2016 4.241 306 4.546 906 768 1.827 1.046 490 82.956 284.205 95.222 39.428 10.002 11.040 3.921 555 85 67 18 55 610 183 427 11 416 Historical 2017 4.822 388 5.210 960 853 2.099 1.298 556 742 94 93 51 (47) 746 224 522 13 509 Net Debt/ Debt/ Debt Value Equity 31,8% 46,7% 25,1% 33,5% 20,2% 25,4% 26,2% 35,5% 25,8% 35,3% 2018 5.519 401 5.919 1.076 960 2.333 1.550 582 968 85 90 83 7 1.063 319 744 15 729 115 600 Equity 2019 2020 6.291 7.172 472 538 6.764 7.711 1.226 1.398 1.095 1.248 2.660 3.033 1.783 2.032 664 757 1.119 1.275 144 684 164 779 Forecast 2021 2022 2023 8.069 8.876 10.225 606 666 713 8.674 9.542 10.938 1.573 1.730 2.076 1.404 1.544 1.853 3.412 3.753 4.503 2.286 2.515 2.505 851 936 1.030 1.435 1.578 1.475 184 877 Beta Revenue EBIT EBITDA 0,95 52.658 14.744 21.186 0,98 51.221 1,07 46.676 1,24 4.876 1,06 8.775 17.624 8.377 15.768 638 1.286 203 964 Net Income 4.932 5.334 4.399 312 280 1.061 Balance Sheets Assets: Cash & Cash Equivalents Marketable Securities Accounts Receivable Inventory Prepaid Expenses Deferred Taxes Other Current Assets Total Current Assets Property, Plan & Equipment Licenses Customer Lists Marketable Equity Securities Investments in Affiliated Entities Long Term Note Receivable Goodwill Other Long Term Assets Total Assets Liabilities & Owners' Equity: Accounts Payable Deferred Revenue & Deposits Accrued Liabilities Taxes Payable Deferred Taxes Note Payable Forward Contract Derivative Liability Other Current Liab Total Current Liabilities Long Term Debt Forward Contracts Derivative Liability Deferred Tax Liability Asset Retirement Obligation Other Deferred Liabilities Minority Interest Common Stock & Paid-In Capital Retained Earnings Common equity Total Liabilities & Owners' Equity $ million 2016 29 0 362 93 32 8 15 540 2.553 1.362 48 225 172 5 481 30 5.416 254 111 43 37 0 135 0 0 83 663 1.001 160 26 647 90 46 42 2017 33 249 407 117 35 0 13 855 2.629 1.494 26 5 150 5 485 31 5.681 255 123 48 27 26 35 160 89 94 857 1.002 0 0 602 128 63 37 2018 205 16 435 101 42 19 16 834 2.595 1.482 15 0 158 4 491 32 5.612 261 143 59 43 O O O O 0 0 0 0 98 604 1.002 0 0 554 127 85 43 1.375 1.379 1.404 1.366 1.614 1.792 2.741 2.993 3.196 5.416 5.681 5.612 You are required to perform the valuation of BJX Corp. In addition to the information contained on the tables below, you know that the company long term growth rate will be a function of return on capital and reinvestment rate. The company's current market value capital structure of D/(D+E) = 40% is expected to remain unchanged for the foresseable future. Using this information and the valuation methodologies discussed in Corporate Finance II, answer the following questions: a) Calculate the Free Cash Flow for the period 2019-23 (6 points) b) Calculate the appropriate discount rate (6 points) c) Calculate the Continuing Value growth rate (6 points) d) Calculate the Enterprise Value, assuming that the 2023 free cash flow will grow at the continuing value growth rate. Apply the midyear adjustment. (6 points) e) Now assume that, after 2023, new investments will render only the cost of capital. Recalculate the enterprise value; apply the midyear adjustment. (6 points) $ million Operating Results: Service Revenue Plus: Equipment Sales Total Revenue Less: System Operating Expenses Less: Cost of Equipment Sold Less: Selling, General & Administrative EBITDA Less: Depreciation & Amortization EBIT Less: Interest Expense Plus: Equity in Earnings of Affiliates Plus: Gains (Losses) on Investments Plus: Other Income EBT Less: Taxes Income Before Minority Interest Less: Minority Interest Net Income Net Operating Working Capital Capital Expenditures Company and market data: Rf Rd Rm Tax rate D/V 2,80% 4,70% 10,00% 30% 0,40 Comparable Companies: Equity Market Value $ million Universal Mobile 177.745 Neuberger Wireless Big Country Comm Rocky Mountain W Average 30% 2016 4.241 306 4.546 906 768 1.827 1.046 490 82.956 284.205 95.222 39.428 10.002 11.040 3.921 555 85 67 18 55 610 183 427 11 416 Historical 2017 4.822 388 5.210 960 853 2.099 1.298 556 742 94 93 51 (47) 746 224 522 13 509 Net Debt/ Debt/ Debt Value Equity 31,8% 46,7% 25,1% 33,5% 20,2% 25,4% 26,2% 35,5% 25,8% 35,3% 2018 5.519 401 5.919 1.076 960 2.333 1.550 582 968 85 90 83 7 1.063 319 744 15 729 115 600 Equity 2019 2020 6.291 7.172 472 538 6.764 7.711 1.226 1.398 1.095 1.248 2.660 3.033 1.783 2.032 664 757 1.119 1.275 144 684 164 779 Forecast 2021 2022 2023 8.069 8.876 10.225 606 666 713 8.674 9.542 10.938 1.573 1.730 2.076 1.404 1.544 1.853 3.412 3.753 4.503 2.286 2.515 2.505 851 936 1.030 1.435 1.578 1.475 184 877 Beta Revenue EBIT EBITDA 0,95 52.658 14.744 21.186 0,98 51.221 1,07 46.676 1,24 4.876 1,06 8.775 17.624 8.377 15.768 638 1.286 203 964 Net Income 4.932 5.334 4.399 312 280 1.061 Balance Sheets Assets: Cash & Cash Equivalents Marketable Securities Accounts Receivable Inventory Prepaid Expenses Deferred Taxes Other Current Assets Total Current Assets Property, Plan & Equipment Licenses Customer Lists Marketable Equity Securities Investments in Affiliated Entities Long Term Note Receivable Goodwill Other Long Term Assets Total Assets Liabilities & Owners' Equity: Accounts Payable Deferred Revenue & Deposits Accrued Liabilities Taxes Payable Deferred Taxes Note Payable Forward Contract Derivative Liability Other Current Liab Total Current Liabilities Long Term Debt Forward Contracts Derivative Liability Deferred Tax Liability Asset Retirement Obligation Other Deferred Liabilities Minority Interest Common Stock & Paid-In Capital Retained Earnings Common equity Total Liabilities & Owners' Equity $ million 2016 29 0 362 93 32 8 15 540 2.553 1.362 48 225 172 5 481 30 5.416 254 111 43 37 0 135 0 0 83 663 1.001 160 26 647 90 46 42 2017 33 249 407 117 35 0 13 855 2.629 1.494 26 5 150 5 485 31 5.681 255 123 48 27 26 35 160 89 94 857 1.002 0 0 602 128 63 37 2018 205 16 435 101 42 19 16 834 2.595 1.482 15 0 158 4 491 32 5.612 261 143 59 43 O O O O 0 0 0 0 98 604 1.002 0 0 554 127 85 43 1.375 1.379 1.404 1.366 1.614 1.792 2.741 2.993 3.196 5.416 5.681 5.612

Answer rating: 100% (QA)

ANSWER a Calculation of Free Cash Flow for the period 20192023 Free Cash Flow EBIT1T Depreciation Amortization Capital Expenditures Increase in Net Op... View the full answer