26. Recalculate the intrinsic value of Honda shares using the free cash flow model of Spreadsheet 13.2(available at www.mhhe.com/bkm; link to Chapter 13 material). Treat each scenario independently. (LO 13-4) a. Hondas P/E ratio starting in 2015 will be 13.5. b. Hondas unleveraged beta is .7. c. The market risk premium is 8.5%.
I need 250 words explanation on how its done and comments
2011 2012 2013 2014 2015 A. Ioput data PIE Cap spendingshr 18.004.50 14.33 14.17 14.00 LT Debt 27500 3000028333 26667 25000 1795 1797 1800 1800 1798 1.70 EPS Working Capital 27630 3683540563 44292 48020 B. Cas flor calcalations Profits (after ta) Interest(after tax Chg Working Cap Depreciation 3190.0 5735.06226.7 6718.3 7210.0 7508 819.0 773.5 728.0 682.5 9205.0 3728.3 3728.3 3728.3 6900.0 6933 6967 7000.0 4770.0 5004.9 5239.8 5474.8 (1-ta rate)r debt LT Debt FCFF FCFE 521.0 5200.3 5444.85689.4 1160.0 2760.1 3050.2 3340.3 106504.6 85210.4 assumes fixed debt ratio after 2015 C. Discount rate calcalations Current beta unlevered bet terminal growth tax rate r debt risk-free rate market risk prem MV equity Debtrvalue Levered beta k equity WACC PV factor for FCFF PV factor for FCFE from Value Line current beta t[1-(1-tax-debtlequity)) 0.686 0.025 from Value Line TM in 2012 on A+ rated LT debt 0.042 0.029 Row 3 Row 11 line ar trend from initial to final yalue unlevered beta % [1-(1-tax)"debtlequity] from CAPM and levered beta 1-t)'r-debt.DN + k, equity.(1 Discount each ear at WACC 57420 100940 0.29 0.26 0.23 0.9000.871 0.844 0.819 0.797 0.0990.097 0.095 0.093 0.077 0.078 0.078 0.079 0.080 1.000 0.9280.860 0.797 0.738 1.000 0.910 0.830 0.758 0.694 0.093 0.080 0.738 0.694Discount each year atk equity D. Present ralses PVIFCFF) PVIFCFE 4341 2313 420 2318 8641 483 4474 056 9117463674 35.37 67114 37.29 229 2011 2012 2013 2014 2015 A. Ioput data PIE Cap spendingshr 18.004.50 14.33 14.17 14.00 LT Debt 27500 3000028333 26667 25000 1795 1797 1800 1800 1798 1.70 EPS Working Capital 27630 3683540563 44292 48020 B. Cas flor calcalations Profits (after ta) Interest(after tax Chg Working Cap Depreciation 3190.0 5735.06226.7 6718.3 7210.0 7508 819.0 773.5 728.0 682.5 9205.0 3728.3 3728.3 3728.3 6900.0 6933 6967 7000.0 4770.0 5004.9 5239.8 5474.8 (1-ta rate)r debt LT Debt FCFF FCFE 521.0 5200.3 5444.85689.4 1160.0 2760.1 3050.2 3340.3 106504.6 85210.4 assumes fixed debt ratio after 2015 C. Discount rate calcalations Current beta unlevered bet terminal growth tax rate r debt risk-free rate market risk prem MV equity Debtrvalue Levered beta k equity WACC PV factor for FCFF PV factor for FCFE from Value Line current beta t[1-(1-tax-debtlequity)) 0.686 0.025 from Value Line TM in 2012 on A+ rated LT debt 0.042 0.029 Row 3 Row 11 line ar trend from initial to final yalue unlevered beta % [1-(1-tax)"debtlequity] from CAPM and levered beta 1-t)'r-debt.DN + k, equity.(1 Discount each ear at WACC 57420 100940 0.29 0.26 0.23 0.9000.871 0.844 0.819 0.797 0.0990.097 0.095 0.093 0.077 0.078 0.078 0.079 0.080 1.000 0.9280.860 0.797 0.738 1.000 0.910 0.830 0.758 0.694 0.093 0.080 0.738 0.694Discount each year atk equity D. Present ralses PVIFCFF) PVIFCFE 4341 2313 420 2318 8641 483 4474 056 9117463674 35.37 67114 37.29 229
