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You are a senior financial analyst of a firm based in Sydney. You have been assigned with the task of training interns who recently joined
You are a senior financial analyst of a firm based in Sydney. You have been assigned with the task of training interns who recently joined your firm on how to use the free cash flow model to estimate the value of a company. You have collected data on the following data: The company plans to invest 30% of the EBIT in capital projects each year. Depreciation in each year is expected to be 50% of EBIT. Using the information, you have collected above, perform calculations to explain to interns as to how the following are calculated: i. Free cash flow to firm ii. Free cash to equity iii. Value of the firm according to the free cash flow to firm method iv. Value of the firm according to the free cash flow to equity method v. Estimated price of an equity share according to the free cash flow to firm method and the free cash flow to equity method Note: For parts i and ii prepare a table showing how free cash flow to firm and free cash flow to equity are calculated. Follow the example in the lecture notes for session 7 . You are a senior financial analyst of a firm based in Sydney. You have been assigned with the task of training interns who recently joined your firm on how to use the free cash flow model to estimate the value of a company. You have collected data on the following data: The company plans to invest 30% of the EBIT in capital projects each year. Depreciation in each year is expected to be 50% of EBIT. Using the information, you have collected above, perform calculations to explain to interns as to how the following are calculated: i. Free cash flow to firm ii. Free cash to equity iii. Value of the firm according to the free cash flow to firm method iv. Value of the firm according to the free cash flow to equity method v. Estimated price of an equity share according to the free cash flow to firm method and the free cash flow to equity method Note: For parts i and ii prepare a table showing how free cash flow to firm and free cash flow to equity are calculated. Follow the example in the lecture notes for session 7
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