Question
Simtek projects year-end EBIT of $900M, $100M in capital expenditures, and $40M in depreciation, all expected to grow at 5% annually. Simtek has $4,638M of
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Simtek projects year-end EBIT of $900M, $100M in capital expenditures, and $40M in depreciation, all expected to grow at 5% annually. Simtek has $4,638M of 6% perpetual debt trading at face value and no excess cash. The tax rate is 40%, and Simtek debt will grow at 5% annually with the rest of the firm. Simtek has an unlevered cost of capital RA equal to 10.10%.
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Find the year-end free cash flow to the firm (FCF).
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Use the adjusted present value (APV) method to find the value of equity.
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Find the free cash flow to equity (FCFE).
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Find the cost of equity RE.
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Use the free cash flow to equity method to find the value of equity.
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Find the weighted average cost of capital RWACC.
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Use the free cash flow to the firm method to find the value of equity.
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The Short Term Rental Success Guide From Host To Hospitality Expert
Authors: Alexandra Hartwell
1st Edition
979-8860876309
