Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Use the following to answer questions 30-35. Relive the Fight is a company that takes Capital citizens on tours of former Hunger Games arenas. The

image text in transcribed

Use the following to answer questions 30-35. Relive the Fight is a company that takes Capital citizens on tours of former Hunger Games arenas. The current owner, Effie Trinket has decided she no longer wants anything to do with the Hunger Games and has decided to sell the company. Caesar Flickerman is very excited when he finds out about her decision and has hired you to determine whether Effie's asking price of dollar 5 million is fair. With the Quarter Quell coming up, sales are not expected to slow to the long-run growth rate until 2020, after which time they are projected to grow at a constant rate of 1 percent (characteristic of the industry). The appropriate discount rate (WACC) is 10 percent. If Caesar purchases the firm, he will close (become the new owner) on January 1, 2017 (assume the current year is 2016). Use the firm's financial data provided below to answer the following questions. Round answers to the nearest dollar. Financial Data 2017 Total Revenue dollar 1, 171, 429 Cost of Goods Sold dollar 300,000 Other general expenses dollar 200,000 Depreciation and amortization dollar 50,000 Capital Expenditures dollar 10,000 Income Tax Rate 30 percent Current Assets dollar 300,000 Current Liabilities dollar 180,000 Long-term debt dollar 500,000 You have forecasted the firm's total revenue and expenses as above for 2017. What are the firm's free cash flows for 2017? dollar 205,000 dollar 305,000 dollar 315,000 dollar 355,000 Assume you're forecasted FCF as follows: 2018 dollar 380,000 2019 dollar 400,000 2020 dollar 425,000 What is the firm's terminal value? dollar 429, 050 dollar 3, 902, 272 dollar 4, 292, 500 dollar 4, 769, 444 What is the PV of the firm's 2017 FCF? Dollar 355,000 dollar 322, 728 dollar 380,000 dollar 277.273 What is the firm's enterprise value? dollar4, 448, 749 dollar 4, 451, 891 dollar 4, 485, 179 dollar4, 893, 464 What is the market value of the firm's common equity? dollar 4, 105, 179 dollar 4, 485, 179 dollar 4, 785, 179 dollar 4, 705, 179 Should Caesar Flickerman proceed with purchasing the business Yes No

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Basic Finance An Introduction To Financial Institutions Investments And Management

Authors: Herbert B. Mayo, Michael J Lavelle

13th Edition

0357714741, 978-0357714744

More Books

Students also viewed these Finance questions