Question
you are an analyst in a fund analyzing a potential investment. the following assumptions are given: ebitda is $30 at year 0 and grow 2%
you are an analyst in a fund analyzing a potential investment. the following assumptions are given: ebitda is $30 at year 0 and grow 2% each year. the company has $75 million of long-term debt on its balance sheet (7% interest rate). the company has $100 million of equity on its balance sheet. assume ongoing capex to be 10% ebitda. assume the capex has a useful life of 10 years with no residual value. depreciation can be accelerated (for deferred tax purposes) using the following simplified macrs schedule: year 1 25% year 2 20% year 3.15% year 4 12% year 5 10% the company has an effective tax rate of 35%. assume 25 days working capital for accounts receivable, 5 for inventory, 10 for accounts payable, and 30 for accrued expenses. for simplification, assume all working capital line items are projected off of ebitda. you have already done some research and found the risk-free rate of return is 3%, and the market has return 12% over the past 10 years. use a 15.0x ebitda for the ebitda terminal value multiple. assume a 2% perpetuity growth rate assume the company has a beta of 0.5 show your work done and answer the following questions a) what is the npv of ufcf of this company? b) what is the wacc of this company? c) what is the equity value based on ebitda method? d) what is the equity value based on perpetuity method? e) what is the year 5 ebitda? f) what is the year 4 d&a? g) what is the year 3 ebit? h) what is the year 5 deferred tax? i) what is the change of working capital in year 5? j) what is the total ufcf in year 5?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started