Consider the following information for the next set of questions. : the order in which you should solve these questions may not correspond to the order in which they are presented. Heads up: Valuing an Entity with Buy-Manage-Sell Model -- Value to all Stakeholders Introduction Healthcare Trust of America (HTA) is a profitable. debt-free company that invests in medical office buildings and clinical labs. Although the company has been operating in steady-state for years, its share price has collapsed during the Covid Pandemic, along with other companies focused on office buildings and theatres. (The above is a simplified but basically true story. The numbers below are simplified for this problem). Your Equity/Debt investor team is considering buying HTA and restructuring its debt. The asking price for 100% of the firm's stock is: $200.00 MM Your team believes that an optimal capital structure for the firm would be: 70% D/CD+E) If your team proceeds with the HTA transaction: - The equity investors will pay (1-D/(D+E))% of the purchase price from their own funds. - HTA will take out a long-term loan at the moment of close, provided by the debt investors on the team, to pay the current owners the rest of the purchase price. - The equity investors will operate HTA in its raconitalizadotand.tota for two vare - The equity investors will operate HTA in its recapitalized steady-state for two years. - At the end of this time: 100% of the stock will be resold for an estimated $78.00 MM and the loan will be terminated. (Principal will be repaid). Existing As purchased $200.0 $200.0 Financing Structure Ppp+) =D + E = CAPO = Market's view of Enterprise Value D/(D + E) = WD D E 70.0% 0.0% $0.0 $200.0 1 2 Key Rates Income Tax rate TD (pretax) TE IWACC Existing As purchased 28.000% 28.000% 5.000% 9.000% 6.400% 15.472% 6.400% 9.17760% Free Cash Flows FCF DE NOPAT - A Working Capital + Deprec - CAPX Partial Income Statement, Existing NOPAT and FCFS (SMM UON) D = 50.0 Revenue $200.00 - Depreciation ($75.00) - Other Expenses ($100.00) = EBIT $25.00 As Purchased $200.00 (575.00) ($100.00) S25.00 Free Cash Flows FCF (D+E) = NOPAT - 4 Working Capital + Deprec - CAPX Partial Income Statement, Existing NOPAT and FCFS (SMM UON) D = $0.0 Revenue $200.00 - Depreciation ($75.00) - Other Expenses ($100.00) = EBIT $25.00 - Tax on EBIT = NOPAT - A Working Capital + Depreciation - CAPX As Purchased $200.00 ($75.00) ($100.00) $25.00 3 $18.0000 = FCF (D+B) 4 Valuation at T=0 Sport) - Resale price of stock plus loan principal repayment PVD+E) = Team's Estimate of Enterprise Value 6 Ppp-b) = Purchase price (stock + loan) = Market's view of Enterprise Value 7 NPV+E) 09 What is quantity 5 (shown in a green-background cell)? 218 Question 24 What is quantity 8? Question 25 Based on your answer for quantity 8, should the team consider going ahead with this project Choose one answer and one reason. Not enough information is provided to answer this question. Because the NPV 0 NO Because the firm's GAAP Equity is much greater than its market price Question 25 1 pts Based on your answer for quantity 8, should the team consider going ahead with this project? Choose one answer and one reason Not enough information is provided to answer this question Because the NPV Yes Because the NOPAT is positive Because the team cannot make a final determination without analyzing out-of-model considerations. Question 26 1 pts What is the absolute value of quantity 3 (shown in a green background cell)? 7 4 5 6 7 8 9 0 Question 27 1 pts What is quantity 6 (shown in a green-background cell)? 200 Question 28 1 pts What is quantity 4 (shown in a green-background cell)? -57 Question 29 1 pts What is quantity 1 (shown in a green-background cell)? 140 Question 30 What is quantity 7 (shown in a green-background cell)? 200 Question 31 What is quantity 2 (shown in a green-background cell)? 60 Consider the following information for the next set of questions. : the order in which you should solve these questions may not correspond to the order in which they are presented. Heads up: Valuing an Entity with Buy-Manage-Sell Model -- Value to all Stakeholders Introduction Healthcare Trust of America (HTA) is a profitable. debt-free company that invests in medical office buildings and clinical labs. Although the company has been operating in steady-state for years, its share price has collapsed during the Covid Pandemic, along with other companies focused on office buildings and theatres. (The above is a simplified but basically true story. The numbers below are simplified for this problem). Your Equity/Debt investor team is considering buying HTA and restructuring its debt. The asking price for 100% of the firm's stock is: $200.00 MM Your team believes that an optimal capital structure for the firm would be: 70% D/CD+E) If your team proceeds with the HTA transaction: - The equity investors will pay (1-D/(D+E))% of the purchase price from their own funds. - HTA will take out a long-term loan at the moment of close, provided by the debt investors on the team, to pay the current owners the rest of the purchase price. - The equity investors will operate HTA in its raconitalizadotand.tota for two vare - The equity investors will operate HTA in its recapitalized steady-state for two years. - At the end of this time: 100% of the stock will be resold for an estimated $78.00 MM and the loan will be terminated. (Principal will be repaid). Existing As purchased $200.0 $200.0 Financing Structure Ppp+) =D + E = CAPO = Market's view of Enterprise Value D/(D + E) = WD D E 70.0% 0.0% $0.0 $200.0 1 2 Key Rates Income Tax rate TD (pretax) TE IWACC Existing As purchased 28.000% 28.000% 5.000% 9.000% 6.400% 15.472% 6.400% 9.17760% Free Cash Flows FCF DE NOPAT - A Working Capital + Deprec - CAPX Partial Income Statement, Existing NOPAT and FCFS (SMM UON) D = 50.0 Revenue $200.00 - Depreciation ($75.00) - Other Expenses ($100.00) = EBIT $25.00 As Purchased $200.00 (575.00) ($100.00) S25.00 Free Cash Flows FCF (D+E) = NOPAT - 4 Working Capital + Deprec - CAPX Partial Income Statement, Existing NOPAT and FCFS (SMM UON) D = $0.0 Revenue $200.00 - Depreciation ($75.00) - Other Expenses ($100.00) = EBIT $25.00 - Tax on EBIT = NOPAT - A Working Capital + Depreciation - CAPX As Purchased $200.00 ($75.00) ($100.00) $25.00 3 $18.0000 = FCF (D+B) 4 Valuation at T=0 Sport) - Resale price of stock plus loan principal repayment PVD+E) = Team's Estimate of Enterprise Value 6 Ppp-b) = Purchase price (stock + loan) = Market's view of Enterprise Value 7 NPV+E) 09 What is quantity 5 (shown in a green-background cell)? 218 Question 24 What is quantity 8? Question 25 Based on your answer for quantity 8, should the team consider going ahead with this project Choose one answer and one reason. Not enough information is provided to answer this question. Because the NPV 0 NO Because the firm's GAAP Equity is much greater than its market price Question 25 1 pts Based on your answer for quantity 8, should the team consider going ahead with this project? Choose one answer and one reason Not enough information is provided to answer this question Because the NPV Yes Because the NOPAT is positive Because the team cannot make a final determination without analyzing out-of-model considerations. Question 26 1 pts What is the absolute value of quantity 3 (shown in a green background cell)? 7 4 5 6 7 8 9 0 Question 27 1 pts What is quantity 6 (shown in a green-background cell)? 200 Question 28 1 pts What is quantity 4 (shown in a green-background cell)? -57 Question 29 1 pts What is quantity 1 (shown in a green-background cell)? 140 Question 30 What is quantity 7 (shown in a green-background cell)? 200 Question 31 What is quantity 2 (shown in a green-background cell)? 60