Question
This work is done several times ,be sure of your answer 1. I think the Free Cash Flow (FCF) can be obtained from the Equity
This work is done several times ,be sure of your answer
1. I think the Free Cash Flow (FCF) can be obtained from the Equity Cash Flow (CFac) by
using the relation: FCF = CFac + Interests - D. Is this true?
2. Is the relation between capitalization and book value of shares a good guide to
investments?
3. Does it make any sense to form a portfolio comprised of companies with a higher
return per dividend?83
4. A financial consultant is valuing the company I set as an objective (an entertainment
centre) by discounting the cash flows until the end of the dealership at 7.26% (interest
rate on 30-year-bonds = 5.1%; market premium = 5%, and Beta = 0.47%). 0.47 is a
beta provided by Bloomberg for Kinepolis (the company whose activity is the
management of several cinemas in the EU), in function of the Dax Index. Is it correct
to use the beta of Kinepolis in this valuation?
5. I am confused because I see different formulae to lever and unlever betas in different
books (Damodaran, McKinsey, Brealey & Myers ...). Which is the correct one?
6. According to what I read in a book, market efficiency hypothesis implies that the
expected average value of variations in the shares price is zero. Therefore, the best
estimate of the future price of a share is its price today, as it incorporates all the
available information. Is that right?
7. An investment bank calculated my WACC. The report says: "the definition of the
WACC is WACC = RF + u (RM - RF); RF being the risk-free rate, u the unleveraged
beta and RM the market risk rate." This is different from what we have seen in our
class. Are they right?
8. I read in a sentence passed by the Supreme Court that, in order to value companies,
economic doctrine relies on intermediary methods between the practical models and the
'Anglo-Saxon' theoretical models common in the United States and United Kingdom,
and the criteria set by the Administration is the result of a combination of both
methods. This is completely different from what we have seen in class - is it correct?
9. Did you see the Vueling case? How is it possible that an investment bank set the9333
objective price of its shares in 2.50 per share on the 2nd of October of 2007, just after
placing Vueling shares at 31 per share in June 2007?
10. I suppose that a valuation consciously realized in my name tells me how much I have
to offer for the company, right?
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