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Please answer these: roblems 1. Starting from their historical financial statements, forecast the expected future cash flows for a real firm in two stages corresponding
Please answer these:
roblems 1. Starting from their historical financial statements, forecast the expected future cash flows for a real firm in two stages corresponding to two time periods. Stage one is a finite horizon from years 1 to 5. Stage two is the remaining infinite horizon from year 6 to infinity. Given these forecasted cash flows, compute the current value of the firm and the value added by the firm using five equivalent methods: (1) Adjusted Present Value, (2) Free Cash Flow to Equity, (3) Free Cash Flow to the Firm, (4) Dividend Discount Model, and (5) Residual Income. Given expected future cash flows for a project, compute the present value of future cash flows and the NPV of the project using the same five equivalent methods. 2. Perform instant experiments on whether changing various inputs causes an increase or decrease in the firm's value / share and by how much. (a.) What happens when the date 0 firm capital is increased? (b.) What happens when the tax rate is increased? (c.) What happens when the unlevered cost of equity capital is increased? (d.) What happens when the riskfree rate is increased? (e.) What happens when the infinite horizon growth rate of unlevered equity is increased? roblems 1. Starting from their historical financial statements, forecast the expected future cash flows for a real firm in two stages corresponding to two time periods. Stage one is a finite horizon from years 1 to 5. Stage two is the remaining infinite horizon from year 6 to infinity. Given these forecasted cash flows, compute the current value of the firm and the value added by the firm using five equivalent methods: (1) Adjusted Present Value, (2) Free Cash Flow to Equity, (3) Free Cash Flow to the Firm, (4) Dividend Discount Model, and (5) Residual Income. Given expected future cash flows for a project, compute the present value of future cash flows and the NPV of the project using the same five equivalent methods. 2. Perform instant experiments on whether changing various inputs causes an increase or decrease in the firm's value / share and by how much. (a.) What happens when the date 0 firm capital is increased? (b.) What happens when the tax rate is increased? (c.) What happens when the unlevered cost of equity capital is increased? (d.) What happens when the riskfree rate is increased? (e.) What happens when the infinite horizon growth rate of unlevered equity is increasedStep by Step Solution
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