Question 12 [2 points) You are valuing Bowen Limited and have gathered the following information from Bowen's latest consolidated financial statements: Short term bank loans (floating rate): due in 1 year with a principal amount of $250 million. Bonds outstanding: maturing in 4 years with a face value of $500 million and an annual coupon rate of 6% p.a., currently trading at a yield to maturity of 4% p.a. Warrants issued by Bowen: 30 million units outstanding with a market price of $6.5 per unit. Each unit can be converted into one common share at an exercise price of $4.5. The warrants have a remaining life of 2 years. Bowen has an issued share capital of 110 million shares, trading at $11 per share. Bowen has a 60% owned consolidated subsidiary, Carline Limited. Carline is also a listed company with 180 million shares outstanding, trading at $7 per share. Bowen has a consolidated cash balance of $120 million. Bowen reported EBIT of $520 million in Year 0 (from the consolidated income statement) The tax rate is 40%. a. Based on the above, what is the implied value of Bowen's consolidated operating assets? [1 point] b. Based on the value derived in a., and assuming a constant growth rate of 3% and sustainable ROIC of 12%, what is the WACC of Bowen as implied by the market prices? [1 point] Question 12 [2 points) You are valuing Bowen Limited and have gathered the following information from Bowen's latest consolidated financial statements: Short term bank loans (floating rate): due in 1 year with a principal amount of $250 million. Bonds outstanding: maturing in 4 years with a face value of $500 million and an annual coupon rate of 6% p.a., currently trading at a yield to maturity of 4% p.a. Warrants issued by Bowen: 30 million units outstanding with a market price of $6.5 per unit. Each unit can be converted into one common share at an exercise price of $4.5. The warrants have a remaining life of 2 years. Bowen has an issued share capital of 110 million shares, trading at $11 per share. Bowen has a 60% owned consolidated subsidiary, Carline Limited. Carline is also a listed company with 180 million shares outstanding, trading at $7 per share. Bowen has a consolidated cash balance of $120 million. Bowen reported EBIT of $520 million in Year 0 (from the consolidated income statement) The tax rate is 40%. a. Based on the above, what is the implied value of Bowen's consolidated operating assets? [1 point] b. Based on the value derived in a., and assuming a constant growth rate of 3% and sustainable ROIC of 12%, what is the WACC of Bowen as implied by the market prices? [1 point]
