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Need help for the method please. The following applies to Company A: 1 YEAR Revenues 2 6,700,000 1,300,000 3,800,000 5,000,000 1,200,000 3,500,000 3 8,500,000 2,400,000
Need help for the method please.
The following applies to Company A: 1 YEAR Revenues 2 6,700,000 1,300,000 3,800,000 5,000,000 1,200,000 3,500,000 3 8,500,000 2,400,000 2,100,000 4 7,200,000 1,890,000 2,900,000 5 8,200,000 1,950,000 0 Cost of Goods Sold Working Capital Additional information about Company A: At Time 0 (today) the working capital is 0 and the company issued 7,500,000 worth of debt, which it plans to keep constant. The interest rate is 3.50%. After year 5 the company will end. The assets are fully depreciated and they will have 0 salvage value. The company has 320,000 outstanding shares. Company A's unlevered return on equity is 8.50%. 2 3 The Following applies to Company B: YEAR 1 Revenues 20,000,000 Cost of Goods Sold 21,000,000 Working Capital 5,000,000 15,000,000 5,000,000 3,500,000 3,000,000 4,000,000 0 Additional information about Company B: At Time 0 (today) the working capital is 0, and the company has no debt. After 3 years the company will end. The assets are fully depreciated and they have a 0 salvage value. The company has 100,000 outstanding shares. Company B's unlevered return on equity is 6.55%. For both companies the tax rate is 23%. a) What is the asset value of Company A and Company B? [8 Points] b) What is the share price of Company A and Company B? [5 Points] The following applies to Company A: 1 YEAR Revenues 2 6,700,000 1,300,000 3,800,000 5,000,000 1,200,000 3,500,000 3 8,500,000 2,400,000 2,100,000 4 7,200,000 1,890,000 2,900,000 5 8,200,000 1,950,000 0 Cost of Goods Sold Working Capital Additional information about Company A: At Time 0 (today) the working capital is 0 and the company issued 7,500,000 worth of debt, which it plans to keep constant. The interest rate is 3.50%. After year 5 the company will end. The assets are fully depreciated and they will have 0 salvage value. The company has 320,000 outstanding shares. Company A's unlevered return on equity is 8.50%. 2 3 The Following applies to Company B: YEAR 1 Revenues 20,000,000 Cost of Goods Sold 21,000,000 Working Capital 5,000,000 15,000,000 5,000,000 3,500,000 3,000,000 4,000,000 0 Additional information about Company B: At Time 0 (today) the working capital is 0, and the company has no debt. After 3 years the company will end. The assets are fully depreciated and they have a 0 salvage value. The company has 100,000 outstanding shares. Company B's unlevered return on equity is 6.55%. For both companies the tax rate is 23%. a) What is the asset value of Company A and Company B? [8 Points] b) What is the share price of Company A and Company B? [5 Points]Step by Step Solution
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