4. Assuming the market value of debt equals today's book value of debt, what is the intrinsic equity value for BrandCo? What is the value per share? Does it differs from the share price used to determine the cost-of-capital weightings in Question 2? Chapter 8 EXHIBIT 8.18 BrandCo: Income Statement and Reorganized Balance Sheet $ million Income statement Revenues Operating costs Depreciation Operating profits Today Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 3,7771 4,041.5 4,304.2 4,583.9 4,859.0 5,126.2 5,382.5 (3,245.1) (3,435.2) (3,658.5) (3,896.3) (4,130.1) (4,357.3) (4,575.1) (829) 97.0) (103.3) (110.0) (116.6) (123.0) (1292) 4491 5092 5423 577.6 6122 645.9 6782 Interest Earnings before taxes (140) 435.1 (140) 495.2 (14.0) 528.3 (14.0) 563.5 (14.0) 598.2 (140) 631.9 (140) 6642 Taxes Net income (130.5) 304,6 (148.6) 346.6 (158.5) 369.8 (169.1) 394.5 (179.5) 418.7 (1896) 4423 (199.2) 464.9 Reorganized balance sheet Operating working capital Property and equipment Invested capital 1889 1.510.8 1,699.7 202.1 1,616.6 1,818.7 215.2 1.721.7 1,936.9 229.2 1,833.6 2,062.8 242.9 1.943.6 2,186.5 256.3 2.050.5 2.306.8 269.1 2.153.0 2.422.1 Debt Shareholders' equity Invested capital 280.5 1.4192 1,699.7 280.5 1,5382 1,818.7 280.5 1,656.4 1,936.9 280.5 1,7823 2,062.8 280.5 1.906.0 2,186.5 280.5 2.026.3 2,306.8 280.5 2.141.6 2.422.1 Accounts payable has been netted against inventory to determine operating working capital 1. Exhibit 8.18 displays the income statement and reorganized balance sheet for BrandCo, a consumer products company. Using the methodology outlined in Exhibit 8.5, determine net operating profit less adjusted taxes (NOPLAT) for years 1 to 6. Assume an operating tax rate of 30 percent. Using the methodology outlined in Exhibit 8.6, determine free cash flow for years 1 to 6. 1 out of 6 Download