hi I need those questions about the estimate of the cost of capital and expansion scenario answered please thank you for your help

Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Real Farm Inc. Company History: Real Farm Inc. is a retail chain founded by Jacques Bloom in 1903 as a family business in Wallingford, CT. Since the foundation, the company has experienced a major transformation from being a local grocery and supermarket to a brick-and-mortar chain of hypermarkets, discount department stores, and grocery stores. Real Farm had 437 stores in total in all U.S. states as of December 2018. What used to be a family-owned business, became public in 1963 with the efforts of Mr. Bloom's three children. The company has survived two major financial crises (Great Depression and Great Recession). Yet, current developments in the retail industry has hit the company's future growth prospects more than ever. The company's share price plummeted from $24.72 at the end of April 2018 to $12.51 at the end of December 2018. Ms. Madelaine Bloom Camille, the current CFO of Real Farm and youngest grandchild of Mr. Jacques Bloom, believes the company's equity valuation is too low and considers a share repurchase plan of $50 million. Industry highlights: Real Farm was the industry leader until early 2000s. However, factors such as advancements in technology, e-commerce, shifts in purchasing habits of consumers and rising rents hurt the traditional brick-and-mortar stores. These changes in the market led to closing and/or bankruptcies of many brick- and-mortar stores in the U.S. These phenomena are called 'Retail Apocalypse' among the media and industry analysts. In order to gain market share in the online retail business, Real Farm acquired two major e- commerce websites, one in 2010 and the other one in 2015. Although this inorganic growth strategy helped the company increase its revenue, in 2018 80% of the company's sales still came from physical stores rather than online sales. This means the costs still remained high. Therefore, its profitability has been below its major competitors in the online retail. As of 2018 the market leaders in the retail industry are IdeaMart and Cheshire Goods. Both of these companies are online retailers that do not have physical store presence. This means their costs are much lower and their operating profitability is much higher than Real Farm. IdeaMart recently acquired 'Express', a major delivery services company in the country, and introduced same-day shipping options for groceries. Right after the announcement of the acquisition, IdeaMart share price jumped by 10%. Two weeks later Cheshire Goods announced that they would start a pilot program to test their in-house built drone-delivery services that would reduce the delivery time to a couple of hours at the maximum. The other two major online retailers are Maxi Market and City's Best. All of these companies have higher share price and market valuation than Real Farm. On the more traditional side of the industry, three other competitors that have similar business models as Real Farm are Baylor, Consolidated Markets and Country Wide. Not surprisingly their market valuations are also similar to Real Farm. In light of all these facts and recent performance of the company, CFO Ms. Camille wants to evaluate two scenarios. One of them is an expansion scenario, in which the revenue growth forecast is 3% A Share P Comments Review Draw Design References Mailings View Help File Home Insert Layout PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing 2... L.. . 3.. . I. . . 4 . . . . . . 5 6. and operating margin is 9% in the long term (2023 and after). In the second scenario Ms. Camille evaluates recession possibilities and forecasts revenue growth to be stagnant (0%) and operating margin to be 5% in the long term (2023 and after). You are expected to prepare a report to the CFO answering below questions using the historical and forecasted financial information provided in the excel document. Questions: 1. Summarize the recent financial condition of Real Farm (refer to financial statements and industry information). 2. Using the information provided, find WACC of Real Farm and its competitors on excel sheet Question 2. Determine whether comparable firms' average is a good representation of Real Farm's cost of capital. Why/Why not? 3. Use excel sheet Question 3 to find FCF and implied share price of the company in the expansion scenario. You have to use WACC you find in Question 2. Use excel sheet Question 4 to find FCF and implied share price of the company in the recession scenario. You have to use WACC you find in Question 2. 5. Discuss Real Farm's dividend policy. What are the signaling implications of this policy? Would 4. you suggest a policy change? When does a management of a firm decide to repurchase shares? What are the possible effects of a share repurchase on the share price? Why? Under which scenario would you advise the firm to repurchase shares? 7. Discuss 'Retail Apocalypse' and recent developments in the retail sector in the U.S. Based on 6. your discussion, determine which forecast scenario is more likely for Real Farm? Reporting instructions: The main body of the report should include at least 1000 words with 1-inch margins on top- bottom-left-right with 1.5 spacing and Times New Roman 12-font (You can use smaller font for tables to fit them in a word document.) In Questions 2, 3 and 4 after you fill in the tables, copy them and paste to a Word document. Then for formatting of the table: Highlight the table. Click on Layout >> Autofit >> Autofit Contents D'Focus Dage 2 off 2 034 words 100 Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fx A27 K REAL FARM Real Farm Income Statement (in millions of dollars) 2 3 2016 4 2015 2017 2018 6. 7 Total Revenue 8 Material, Labor, and Other Pruduction Costs 9 Selling, Distribution, and Marketing Expenses 10 Administrative and General Expenses 11 Goodwill and Other Intangible Asset Impairments 12 Other Operating Expenses Operating Income 14 Net Interest Expense 1,636 1,691 1,593 1,677 743 810 713 682 619 508 478 526 226 276 261 258 290 3 (6) (253) 13 139 175 157 22 19 13 14 Income Before Income Tax Expense (275) (47) (228) 15 120 161 129 16 Income Tax Expense 39 69 50 Net Income 17 81 92 79 18 19 Earnings Per Share (Basic) 20 Dividends per Share (4.89) 2.07 2.18 2.06 0.60 0.36 0.56 0.60 21 22 23 24 25 26 27 28 29 30 Forecast Assumptions Balance Sheet Capital Market Data Question 2 Income Statement Comparable Firms +) ... Pile Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fix B15 849.88 B. D K 2 REAL FARM Real Farm Balance Sheet (in millions of dollars) 3 4 2016 2017 2018 6. 8 Cash and Cash Equivalents 9 Trade Accounts Receivable 138 216 172 136 120 130 10 Inventories 164 180 190 11 Prepaid Expenses 12 Other Current Assets 13 Total Current Assets 128 148 131 94 72 54 679 716 677 14 15 Net Property, Plant, and Equipment and Other Assets 850 832 859 Total Assets 1,529 1,547 16 1,536 17 18 Debt Due within One Year 19 Accounts Payable 20 Other Current Liabilities 87 95 87 272 245 255 21 Current Liabilities 369 332 343 22 23 Long-Term Debt 329 233 235 24 Other Liabilities 196 219 206 25 Shareholders' Equity Total Liabilities and Shareholders' Equity 636 763 752 1,547 26 1,529 1,536 27 28 29 30 31 Comparable Firms Forecast Assumptions Balance Sheet Capital Market Data Question 2 Income Statement Ready 10 File Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fx D24 J REAL FARM Comparable Firms, End of 2018 (in millions of dollars except share price) 3 4 Shares Enterprise Value EBITDA Bond Rating Outstanding Share Price Multiple* Total Cash Total Debt Revenue EBITDA ROA ROE Beta 7 Real Farm 12.51 BB+ 38.3 86 235 714 1,677 204 3.5 7% 11% 1.63 8 Baylor 56.80 8.2 182 101 568 984 48 11.7 4% 9% 1.60 9 Consolidated Markets 1,050 48.28 10.2 197 692 122 5.6 5% 10% 1.45 BB 10 CountryWide 19.92 9.7 10 194 453 30 6.5 4% 2% 1.36 359 11 IdeaMart 50.9 1.85 22.76 31 742 1,901 1,420 5.3 13% 55% 12 Cheshire Goods 69.34 1,890 1,090 27.3 162 156 12.2 14% 19% 0.42 13 Maxi Market 1,350 1.75 32.65 44.8 26 250 1,712 240 7.1 7% 15% BB 14 City's Best 29.97 31.1 114 215 1,145 1,950 189 6.0 8% 1.04 BB- 15 16 17 * EBITDA miltiple = Enterprise Value divided by EBITDA 18 19 20 21 22 23 24 Forecast Assumptions Income Statement Balance Sheet Comparable Firms Capital Market Data Question 2 le Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fx 2.5% F15 J K L N 1 2 REAL FARM Real Farm Operating Performance and Financial Forecast Assumptions 3 4 5 Operating Performance 6. 2012 2013 2014 2015 2016 2017 2018 7 Revenue Growth 0% -7% -1% -5% -3% -2% 8 Operating Margin 8% 2% -1% 6% 9% 9% 10 11 Forecast Assumptions 12 Actual *************** 1sBa1o *************** 13 2018 2019 2020 2021 2022 14 Expansion Scenario 15 Revenue Growth 16 Operating Margin 17 Net Working Capital Turnover 18 Fixed Asset Turnover 2.0% 5.3% 2.5% 1.0% 1.5% 9.4% 9.0% 9.0% 9.0% 9.0% 5.02 6.00 6.50 7.00 7.50 1.95 1.95 1.95 1.95 1.95 19 20 Recession Scenario 21 Revenue Growth -1.0% 5.3% -1.0% -0.5% 0.0% 22 Operating Margin 23 Net Working Capital Turnover 6.0% 9.4% 8.0% 7.0% 5.5% 5.02 6.00 6.50 7.00 7.50 24 Fixed Asset Turnover 1.95 1.95 1.95 1.95 1.95 25 26 The ratios are defined as follows: 27 Revenue Growth = annual percentage change in total revenue 28 Operating Margin = operating income divided by total revenue 29 Net Working Capital Turnover = total revenue divided by net working capital 30 Net working capital = current assets less current liabilities 31 Fixed Assets = net PP&E and other assets item in balance sheet Comparable Firms Forecast Assumptions Question 2 Income Statement Balance Sheet Capital Market Data Draw Home Insert Formulas Data Review View Help A Share File Page Layout Comments i) PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing fr H12 A B K REAL FARM 2 Capital Market Data 4 Yield 30-Day Treasury Bill 10-Year Treasury Bond 0.1% 6. 2.8% 10-Year Corporate Bonds of Industrial Companies AAA 2.8% 10 AA 2.9% 11 A+ 3.2% 12 3.3% 13 A- 3.5% 14 BBB+ 3.8% 15 BBB 4.1% 16 BBB- 4.6% 17 BB+ 5.8% 18 BB 6.5% 19 BB- 6.5% 20 6.8% B+ 21 8.4% 22 B- 9.0% 23 24 Historical Market Risk Premium 25 Equity Market Index Less Government Debt 5.5% 26 27 5-Year Forecast 28 U.S. Real GDP Annual Growth Rate 3.3% 29 U.S. GDP Annual Deflator Rate 1.8% Consumer Price Index Annual Rate 2.2% 31 32 33 Corporate Tax rate 39.0% 34 35 Forecast Assumptions Balance Sheet Comparable Firms Question 2 Capital Market Data Income Statement ... Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fr H21 D K REAL FARM Estimate of Cost of Capital for Real Farm 3 4 6 Risk-Free Rate 7 Market Risk Premium 8 Tax Rate Cost of equity Debt/Value Bond Rating Cost of debt WACC 10 Beta 11 12 Real Farm 13 Baylor 14 Consolidated Markets 15 CountryWide 16 IdeaMart 17 Cheshire Goods 18 Maxi Market 19 City's Best 20 21 Mean 22 23 24 25 26 27 28 29 30 Forecast Assumptions Balance Sheet Capital Market Data Income Statement Comparable Firms Question 2 A Share O Comments Help Review Draw Page Layout Formulas View File Home Insert Data Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fx L23 B D REAL FARM Expansion Scenario 3 long term 4 2018 2019 2020 2021 2022 2023 6 Revenue Growth 7 Operating Margin 8 NWC Turnover 9 FA Turnover 10 WACC 5.3% 1.0% 1.5% 2.0% 2.5% 3.0% 9.4% 9.0% 9.0% 9.0% 9.0% 9.0% 5.02 6.00 6.50 7.00 7.50 7.50 1.95 1.95 1.95 1.95 1.95 1.95 0.0% 11 Tax Rate 39% 12 13 Revenue 14 EBIT 1,677 157 15 16 NWC 17 Fixed Assets 18 ROIC 334 859 8.0% 19 20 NOPAT - change in NWC - change in NFA 23 FCF 24 Horizon value 96 (49) 21 27 22 118 25 Present value in 2018 26 PV of all future CFs 27 Debt 28 Equity 29 Shares 30 31 Implied Price 32 33 *ROIC = Return on invested capital 34 35 Comparable Firms Questi ... + Forecast Assumptions Capital Market Data Balance Sheet Question 2 Question 3 P. Pile Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fx L19 A D REAL FARM Recession Scenario 3 long term 4 2020 2018 2019 2021 2022 2023 6 Revenue Growth 7 Operating Margin 8 NWC Turnover 9 FA Turnover 10 WACC 11 Tax Rate -1.0% 5.3% -1.0% -0.5% 0.0% 0.0% 9.4% 8.0% 7.0% 6.0% 5.5% 5.0% 5.02 6.00 6.50 7.00 7.50 7.50 1.95 1.95 1.95 1.95 1.95 1.95 0.0% 39% 12 13 Revenue 14 EBIT 1,677 157 15 16 NWC 17 Fixed Assets 18 ROIC 334 859 8.0% 19 20 NOPAT - change in NWC - change in NFA 96 (49) 21 27 22 23 FCF 118 24 Horizon value 25 Present value in 2018 26 PV of all future CFs 27 Debt 28 Equity 29 Shares 30 31 Implied Price 32 33 *ROIC = Return on invested capital 34 35 Forecast Assumptions Comparable Firms Question 2 Question 4 Capital Market Data Question 3 ... Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Real Farm Inc. Company History: Real Farm Inc. is a retail chain founded by Jacques Bloom in 1903 as a family business in Wallingford, CT. Since the foundation, the company has experienced a major transformation from being a local grocery and supermarket to a brick-and-mortar chain of hypermarkets, discount department stores, and grocery stores. Real Farm had 437 stores in total in all U.S. states as of December 2018. What used to be a family-owned business, became public in 1963 with the efforts of Mr. Bloom's three children. The company has survived two major financial crises (Great Depression and Great Recession). Yet, current developments in the retail industry has hit the company's future growth prospects more than ever. The company's share price plummeted from $24.72 at the end of April 2018 to $12.51 at the end of December 2018. Ms. Madelaine Bloom Camille, the current CFO of Real Farm and youngest grandchild of Mr. Jacques Bloom, believes the company's equity valuation is too low and considers a share repurchase plan of $50 million. Industry highlights: Real Farm was the industry leader until early 2000s. However, factors such as advancements in technology, e-commerce, shifts in purchasing habits of consumers and rising rents hurt the traditional brick-and-mortar stores. These changes in the market led to closing and/or bankruptcies of many brick- and-mortar stores in the U.S. These phenomena are called 'Retail Apocalypse' among the media and industry analysts. In order to gain market share in the online retail business, Real Farm acquired two major e- commerce websites, one in 2010 and the other one in 2015. Although this inorganic growth strategy helped the company increase its revenue, in 2018 80% of the company's sales still came from physical stores rather than online sales. This means the costs still remained high. Therefore, its profitability has been below its major competitors in the online retail. As of 2018 the market leaders in the retail industry are IdeaMart and Cheshire Goods. Both of these companies are online retailers that do not have physical store presence. This means their costs are much lower and their operating profitability is much higher than Real Farm. IdeaMart recently acquired 'Express', a major delivery services company in the country, and introduced same-day shipping options for groceries. Right after the announcement of the acquisition, IdeaMart share price jumped by 10%. Two weeks later Cheshire Goods announced that they would start a pilot program to test their in-house built drone-delivery services that would reduce the delivery time to a couple of hours at the maximum. The other two major online retailers are Maxi Market and City's Best. All of these companies have higher share price and market valuation than Real Farm. On the more traditional side of the industry, three other competitors that have similar business models as Real Farm are Baylor, Consolidated Markets and Country Wide. Not surprisingly their market valuations are also similar to Real Farm. In light of all these facts and recent performance of the company, CFO Ms. Camille wants to evaluate two scenarios. One of them is an expansion scenario, in which the revenue growth forecast is 3% A Share P Comments Review Draw Design References Mailings View Help File Home Insert Layout PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing 2... L.. . 3.. . I. . . 4 . . . . . . 5 6. and operating margin is 9% in the long term (2023 and after). In the second scenario Ms. Camille evaluates recession possibilities and forecasts revenue growth to be stagnant (0%) and operating margin to be 5% in the long term (2023 and after). You are expected to prepare a report to the CFO answering below questions using the historical and forecasted financial information provided in the excel document. Questions: 1. Summarize the recent financial condition of Real Farm (refer to financial statements and industry information). 2. Using the information provided, find WACC of Real Farm and its competitors on excel sheet Question 2. Determine whether comparable firms' average is a good representation of Real Farm's cost of capital. Why/Why not? 3. Use excel sheet Question 3 to find FCF and implied share price of the company in the expansion scenario. You have to use WACC you find in Question 2. Use excel sheet Question 4 to find FCF and implied share price of the company in the recession scenario. You have to use WACC you find in Question 2. 5. Discuss Real Farm's dividend policy. What are the signaling implications of this policy? Would 4. you suggest a policy change? When does a management of a firm decide to repurchase shares? What are the possible effects of a share repurchase on the share price? Why? Under which scenario would you advise the firm to repurchase shares? 7. Discuss 'Retail Apocalypse' and recent developments in the retail sector in the U.S. Based on 6. your discussion, determine which forecast scenario is more likely for Real Farm? Reporting instructions: The main body of the report should include at least 1000 words with 1-inch margins on top- bottom-left-right with 1.5 spacing and Times New Roman 12-font (You can use smaller font for tables to fit them in a word document.) In Questions 2, 3 and 4 after you fill in the tables, copy them and paste to a Word document. Then for formatting of the table: Highlight the table. Click on Layout >> Autofit >> Autofit Contents D'Focus Dage 2 off 2 034 words 100 Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fx A27 K REAL FARM Real Farm Income Statement (in millions of dollars) 2 3 2016 4 2015 2017 2018 6. 7 Total Revenue 8 Material, Labor, and Other Pruduction Costs 9 Selling, Distribution, and Marketing Expenses 10 Administrative and General Expenses 11 Goodwill and Other Intangible Asset Impairments 12 Other Operating Expenses Operating Income 14 Net Interest Expense 1,636 1,691 1,593 1,677 743 810 713 682 619 508 478 526 226 276 261 258 290 3 (6) (253) 13 139 175 157 22 19 13 14 Income Before Income Tax Expense (275) (47) (228) 15 120 161 129 16 Income Tax Expense 39 69 50 Net Income 17 81 92 79 18 19 Earnings Per Share (Basic) 20 Dividends per Share (4.89) 2.07 2.18 2.06 0.60 0.36 0.56 0.60 21 22 23 24 25 26 27 28 29 30 Forecast Assumptions Balance Sheet Capital Market Data Question 2 Income Statement Comparable Firms +) ... Pile Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fix B15 849.88 B. D K 2 REAL FARM Real Farm Balance Sheet (in millions of dollars) 3 4 2016 2017 2018 6. 8 Cash and Cash Equivalents 9 Trade Accounts Receivable 138 216 172 136 120 130 10 Inventories 164 180 190 11 Prepaid Expenses 12 Other Current Assets 13 Total Current Assets 128 148 131 94 72 54 679 716 677 14 15 Net Property, Plant, and Equipment and Other Assets 850 832 859 Total Assets 1,529 1,547 16 1,536 17 18 Debt Due within One Year 19 Accounts Payable 20 Other Current Liabilities 87 95 87 272 245 255 21 Current Liabilities 369 332 343 22 23 Long-Term Debt 329 233 235 24 Other Liabilities 196 219 206 25 Shareholders' Equity Total Liabilities and Shareholders' Equity 636 763 752 1,547 26 1,529 1,536 27 28 29 30 31 Comparable Firms Forecast Assumptions Balance Sheet Capital Market Data Question 2 Income Statement Ready 10 File Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fx D24 J REAL FARM Comparable Firms, End of 2018 (in millions of dollars except share price) 3 4 Shares Enterprise Value EBITDA Bond Rating Outstanding Share Price Multiple* Total Cash Total Debt Revenue EBITDA ROA ROE Beta 7 Real Farm 12.51 BB+ 38.3 86 235 714 1,677 204 3.5 7% 11% 1.63 8 Baylor 56.80 8.2 182 101 568 984 48 11.7 4% 9% 1.60 9 Consolidated Markets 1,050 48.28 10.2 197 692 122 5.6 5% 10% 1.45 BB 10 CountryWide 19.92 9.7 10 194 453 30 6.5 4% 2% 1.36 359 11 IdeaMart 50.9 1.85 22.76 31 742 1,901 1,420 5.3 13% 55% 12 Cheshire Goods 69.34 1,890 1,090 27.3 162 156 12.2 14% 19% 0.42 13 Maxi Market 1,350 1.75 32.65 44.8 26 250 1,712 240 7.1 7% 15% BB 14 City's Best 29.97 31.1 114 215 1,145 1,950 189 6.0 8% 1.04 BB- 15 16 17 * EBITDA miltiple = Enterprise Value divided by EBITDA 18 19 20 21 22 23 24 Forecast Assumptions Income Statement Balance Sheet Comparable Firms Capital Market Data Question 2 le Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fx 2.5% F15 J K L N 1 2 REAL FARM Real Farm Operating Performance and Financial Forecast Assumptions 3 4 5 Operating Performance 6. 2012 2013 2014 2015 2016 2017 2018 7 Revenue Growth 0% -7% -1% -5% -3% -2% 8 Operating Margin 8% 2% -1% 6% 9% 9% 10 11 Forecast Assumptions 12 Actual *************** 1sBa1o *************** 13 2018 2019 2020 2021 2022 14 Expansion Scenario 15 Revenue Growth 16 Operating Margin 17 Net Working Capital Turnover 18 Fixed Asset Turnover 2.0% 5.3% 2.5% 1.0% 1.5% 9.4% 9.0% 9.0% 9.0% 9.0% 5.02 6.00 6.50 7.00 7.50 1.95 1.95 1.95 1.95 1.95 19 20 Recession Scenario 21 Revenue Growth -1.0% 5.3% -1.0% -0.5% 0.0% 22 Operating Margin 23 Net Working Capital Turnover 6.0% 9.4% 8.0% 7.0% 5.5% 5.02 6.00 6.50 7.00 7.50 24 Fixed Asset Turnover 1.95 1.95 1.95 1.95 1.95 25 26 The ratios are defined as follows: 27 Revenue Growth = annual percentage change in total revenue 28 Operating Margin = operating income divided by total revenue 29 Net Working Capital Turnover = total revenue divided by net working capital 30 Net working capital = current assets less current liabilities 31 Fixed Assets = net PP&E and other assets item in balance sheet Comparable Firms Forecast Assumptions Question 2 Income Statement Balance Sheet Capital Market Data Draw Home Insert Formulas Data Review View Help A Share File Page Layout Comments i) PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing fr H12 A B K REAL FARM 2 Capital Market Data 4 Yield 30-Day Treasury Bill 10-Year Treasury Bond 0.1% 6. 2.8% 10-Year Corporate Bonds of Industrial Companies AAA 2.8% 10 AA 2.9% 11 A+ 3.2% 12 3.3% 13 A- 3.5% 14 BBB+ 3.8% 15 BBB 4.1% 16 BBB- 4.6% 17 BB+ 5.8% 18 BB 6.5% 19 BB- 6.5% 20 6.8% B+ 21 8.4% 22 B- 9.0% 23 24 Historical Market Risk Premium 25 Equity Market Index Less Government Debt 5.5% 26 27 5-Year Forecast 28 U.S. Real GDP Annual Growth Rate 3.3% 29 U.S. GDP Annual Deflator Rate 1.8% Consumer Price Index Annual Rate 2.2% 31 32 33 Corporate Tax rate 39.0% 34 35 Forecast Assumptions Balance Sheet Comparable Firms Question 2 Capital Market Data Income Statement ... Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fr H21 D K REAL FARM Estimate of Cost of Capital for Real Farm 3 4 6 Risk-Free Rate 7 Market Risk Premium 8 Tax Rate Cost of equity Debt/Value Bond Rating Cost of debt WACC 10 Beta 11 12 Real Farm 13 Baylor 14 Consolidated Markets 15 CountryWide 16 IdeaMart 17 Cheshire Goods 18 Maxi Market 19 City's Best 20 21 Mean 22 23 24 25 26 27 28 29 30 Forecast Assumptions Balance Sheet Capital Market Data Income Statement Comparable Firms Question 2 A Share O Comments Help Review Draw Page Layout Formulas View File Home Insert Data Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fx L23 B D REAL FARM Expansion Scenario 3 long term 4 2018 2019 2020 2021 2022 2023 6 Revenue Growth 7 Operating Margin 8 NWC Turnover 9 FA Turnover 10 WACC 5.3% 1.0% 1.5% 2.0% 2.5% 3.0% 9.4% 9.0% 9.0% 9.0% 9.0% 9.0% 5.02 6.00 6.50 7.00 7.50 7.50 1.95 1.95 1.95 1.95 1.95 1.95 0.0% 11 Tax Rate 39% 12 13 Revenue 14 EBIT 1,677 157 15 16 NWC 17 Fixed Assets 18 ROIC 334 859 8.0% 19 20 NOPAT - change in NWC - change in NFA 23 FCF 24 Horizon value 96 (49) 21 27 22 118 25 Present value in 2018 26 PV of all future CFs 27 Debt 28 Equity 29 Shares 30 31 Implied Price 32 33 *ROIC = Return on invested capital 34 35 Comparable Firms Questi ... + Forecast Assumptions Capital Market Data Balance Sheet Question 2 Question 3 P. Pile Enable Editing PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. fx L19 A D REAL FARM Recession Scenario 3 long term 4 2020 2018 2019 2021 2022 2023 6 Revenue Growth 7 Operating Margin 8 NWC Turnover 9 FA Turnover 10 WACC 11 Tax Rate -1.0% 5.3% -1.0% -0.5% 0.0% 0.0% 9.4% 8.0% 7.0% 6.0% 5.5% 5.0% 5.02 6.00 6.50 7.00 7.50 7.50 1.95 1.95 1.95 1.95 1.95 1.95 0.0% 39% 12 13 Revenue 14 EBIT 1,677 157 15 16 NWC 17 Fixed Assets 18 ROIC 334 859 8.0% 19 20 NOPAT - change in NWC - change in NFA 96 (49) 21 27 22 23 FCF 118 24 Horizon value 25 Present value in 2018 26 PV of all future CFs 27 Debt 28 Equity 29 Shares 30 31 Implied Price 32 33 *ROIC = Return on invested capital 34 35 Forecast Assumptions Comparable Firms Question 2 Question 4 Capital Market Data Question 3