Attached are the problems I need help with.

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In the problems following, use an equity risk premium of 5.5 percent if none is specified. 1. You are trying to estimate the trailing 12-month earnings for Fiber Networks. The firm has just reported an operating loss for the first quarter of 2001 of $180 million on revenues of $600 million, a jump from the operating loss of $30 mil- lion on revenues of $120 million in the first quarter of 2000. In its annual report for 2000, Fiber Networks reported an operating loss of $330 million on revenues of $1.1 billion. Estimate the operating loss and revenues for the past four quarters. 2. You have been asked to value Barrista Espresso, a chain of espresso coffee shops that have opened on the East Coast of the United States. The company had earnings before interest and taxes of $10.50 million in the most recent year on revenues of $50 million. However, the founders of the company had never charged themselves a salary, which would have amounted to $1 million if based on comparable companies. The tax rate is 36% for all firms, and working capital is 10% of revenues. The capital expenditures in the most recent year amounted to $4.5 million, while depreciation was only $1 million. Earnings, revenues, and net capital expenditures are expected to grow 30% a year for five years, and 6% after that forever. The comparable firms have an average beta of 1.3567 and an average D/E ratio of 13.65%. The average correlation with the market is 0.50. Barrista Espresso is expected to maintain a debt ratio of 12% and face a cost of debt of 8.75%. The risk-free rate is 6%, and the market risk premium is 5.5%. a. Estimate the value of Barrista Espresso as a firm. b. Estimate the value of equity in Barrista Espresso. c. Would your valuation be different if you were valuing the firm for an IPO? 3. In April 1994, Novell, Inc. announced its plan to acquire WordPerfect Corporation for $1.4 billion. At the time of the acquisition, the relevant information about the two companies was as follows: Novell WordPerfect Revenues $1,200 $600 Cost of goods sold (without depreciation) 57% 75% Depreciation $42 $25 Tax rate 35% 35% Capital Spending $75 $45 Working Capital (as % of revenue) 40% 30% Beta 1.45 1.25 Expected Growth Rate in Revenues/ EBIT 25% 15% Expected period of high growth 10 years 10years Growth rate after high growth period 6% 6% Beta after high growth period 1.10 1.10 Capital spending will be 115% of depreciation after the high-growth period. Neither firm has any debt outstanding. The Treasury bond rate is 7%. a. Estimate the value of Novell, operating independently. b. Estimate the value of WordPerfect, operating independently. c. Estimate the value of the combined firm, with no synergy. d. As a result of the merger, the combined firm is expected to grow 24% a year for the high growth period. Estimate the value of the combined firm with the higher growth. e. What is the synergy worth? What is the maximum price Novell can pay for WordPerfect? 4. An analyst who looks at real estate decides to apply the capital asset pricing model to estimate the risk (beta) for real estate. He regresses returns on a real estate index (based on appraised values) against returns on a stock index, and estimates a beta of 0.20 for real estate. Would you agree with this estimate? If you do not, what might be the sources of your disagreement? 5. Cool Cafe is a well-regarded restaurant in the Denver area, owned and run by Joanne Arapacio, a star chef specializing in Southwestern cuisine. You are interested in buying the restaurant and have been provided the income statement for the firm for the most recent year is reported below (in '000s): Revenues $5,000 Operating expenses $3,500 EBIT $1,500 Interest expenses $300 Taxes $480 Net income $720 The owner did not pay herself a salary last year, but you believe that you will have to pay $200,000 a year for a new chef. The restaurant is in stable growth and is expected to grow 5% a year for the next decade. You estimate the unlevered beta of publicly traded restaurants to be 0.80. The average debt-tocapital ratio for these firms is 30%, and you believe that Cool Cafe will have to operate at close to this average. The risk-free rate is 6%, the market risk premium is 4% and the cost of debt is 7%. a. Estimate the value of Cool Cafe. b. Now assume that you will see a drop-off in revenues of 15% if Joanne Arapacio leaves the restaurant. Assuming that 70% of the current operating expenses are variable and that the remaining 30% of fixed, estimate the value Ms. Arapacio to the restaurant