1. WACC Sandeep Chartwell is supervising a valuation engagement for BERRYMAN, Inc. He estimated the value of equity at 52,800. The table shows other inputs used for the initial WACC calculation. FCFF 1 2 Parameters DBV 13,200.0 Ik 0.09850 0.03200 0.26000 8 0.02200 3 4,200.0 4,200.0 4,360.0 4,360.0 4,360.0 a) What is the initial value of WACC that Chartwell calculates? b) Adjust Chartwell's initial estimate of equity in order to calculate a WACC that is internally consistent with the assumed value of equity. What is this value of WACC? 4 5 2. TJMM An analyst at TJMM Equity Advisors assembled the information provided in the following table for Mitschow Millwork and TrusJoist (MMTJ). NIZ 112.0 56.0 DIV1 ECO Using the expressions for theoretically justified market multiples, calculate the estimated value of MMT)'s equity using Mkt Bk and Forward PE ratios. For input use the value of k provided above, the SGR for g and the calculated value of b for MMTJ. 890.0 k 0.08800 3. Comparables and Fundamentals Weiji Zhang is an analyst at First Simon Capital Partners. She has assembled information for the Cytronics industry and for Kemmerer Electronic Growth Resources (KEGR) shown below. Estimate the per share value using A) The method of comparables B) GGM and average industry values C) GGM and KEGR-specific values D) Using the value of g calculated for (C) estimate KEGR eps two years ago. KEGR D) Suppose that the actual eps for one- and two-years prior had been $2.00 and $1.89. Would that be surprising? 0.093 INDUS AVG k 0.091 8 0.041 POR 0.450 ROE 0.098 PE 9.0 eps (FWD) 0.350 0.105 F) Comment on your answers to parts A, B and C. What do you imagine the relationship is between KEGR and other companies that make up the industry? $ 2.15 4. ROE in Price / Book ratios What would the market's expectations for ROE be in the case of CLAREX, Inc. which trades at $12.30 and has book value of $6.70? Analysts estimate the cost of equity to be 9.2% and forecast that the company's long-term growth will be 3.8%. RoS and turnover for CLAREX are 6.4% and 1.140 respectively, and DuPont leverage in its industry averages 2.2. a) Calculate LEV for CLAREX. b) Using the information for CLAREX provided above, what will be the estimated market price of CLAREX shares if the expectation for long-term ROE becomes 12.5%? c) What would be the change in ROE? What would be the estimated change in share price? 5. FCFF Using the information provided in the data file for the Anchises Corporation, estimate the per share value of the 220 million shares outstanding. Assume that an appropriate (WACC) discount rate for FCFF is 9.1%. After Year 5 you expect FCF growth to decline to 40% of the geometric average growth rate as calculated from the forecasted FCF in years 1-5. 6. Price / Sales Assume that an analyst believed (a) that Solaris Oilfield (SOI) was a good comp for National Gas Service (NGS) and the EV / Sales was an appropriate market multiple. Using 12/31/2019 fye financial statements and share price, would NGS appear to be overvalued, undervalued or fully valued? Explain your reasoning. 1. WACC Sandeep Chartwell is supervising a valuation engagement for BERRYMAN, Inc. He estimated the value of equity at 52,800. The table shows other inputs used for the initial WACC calculation. FCFF 1 2 Parameters DBV 13,200.0 Ik 0.09850 0.03200 0.26000 8 0.02200 3 4,200.0 4,200.0 4,360.0 4,360.0 4,360.0 a) What is the initial value of WACC that Chartwell calculates? b) Adjust Chartwell's initial estimate of equity in order to calculate a WACC that is internally consistent with the assumed value of equity. What is this value of WACC? 4 5 2. TJMM An analyst at TJMM Equity Advisors assembled the information provided in the following table for Mitschow Millwork and TrusJoist (MMTJ). NIZ 112.0 56.0 DIV1 ECO Using the expressions for theoretically justified market multiples, calculate the estimated value of MMT)'s equity using Mkt Bk and Forward PE ratios. For input use the value of k provided above, the SGR for g and the calculated value of b for MMTJ. 890.0 k 0.08800 3. Comparables and Fundamentals Weiji Zhang is an analyst at First Simon Capital Partners. She has assembled information for the Cytronics industry and for Kemmerer Electronic Growth Resources (KEGR) shown below. Estimate the per share value using A) The method of comparables B) GGM and average industry values C) GGM and KEGR-specific values D) Using the value of g calculated for (C) estimate KEGR eps two years ago. KEGR D) Suppose that the actual eps for one- and two-years prior had been $2.00 and $1.89. Would that be surprising? 0.093 INDUS AVG k 0.091 8 0.041 POR 0.450 ROE 0.098 PE 9.0 eps (FWD) 0.350 0.105 F) Comment on your answers to parts A, B and C. What do you imagine the relationship is between KEGR and other companies that make up the industry? $ 2.15 4. ROE in Price / Book ratios What would the market's expectations for ROE be in the case of CLAREX, Inc. which trades at $12.30 and has book value of $6.70? Analysts estimate the cost of equity to be 9.2% and forecast that the company's long-term growth will be 3.8%. RoS and turnover for CLAREX are 6.4% and 1.140 respectively, and DuPont leverage in its industry averages 2.2. a) Calculate LEV for CLAREX. b) Using the information for CLAREX provided above, what will be the estimated market price of CLAREX shares if the expectation for long-term ROE becomes 12.5%? c) What would be the change in ROE? What would be the estimated change in share price? 5. FCFF Using the information provided in the data file for the Anchises Corporation, estimate the per share value of the 220 million shares outstanding. Assume that an appropriate (WACC) discount rate for FCFF is 9.1%. After Year 5 you expect FCF growth to decline to 40% of the geometric average growth rate as calculated from the forecasted FCF in years 1-5. 6. Price / Sales Assume that an analyst believed (a) that Solaris Oilfield (SOI) was a good comp for National Gas Service (NGS) and the EV / Sales was an appropriate market multiple. Using 12/31/2019 fye financial statements and share price, would NGS appear to be overvalued, undervalued or fully valued? Explain your reasoning