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You are provided with a historical income statement for Spring Inc. for 2021. You also make the assumptions regarding company's future summarized in a table
You are provided with a historical income statement for Spring Inc. for 2021. You also make the assumptions regarding company's future summarized in a table below. A. Compute the forecasted FCFF for 2022, 2023, 2024, 2025, 2026 (5 years). B. You computed company's Beta to be equal to 1.3 The 20 year Treasury bond rate is 5% and the market equity risk premium equals to 4%. The Yield to Maturity on company's bonds is 8% and the company's tax rate is 35%. The market value of debt is 40 million, market value of equity is 60 million. Compute company's WACC. C. Assuming after year 5 (2026) the company will enter a steady growth period at g=5.5%, compute the company's Enterprise Value. D. Assuming Debt of $20 million, cash of $5 million, shares outstanding of 4 million, compute company's price. (rememeber that the financial statements were in '000s, so your EV WILL be in '000) E. Now change the assumption regarding incremental working capital investment in the first 5 years (decide how you want to change it). Discuss the impact on the share price. F. Assume the company is private. What methods would you use to compute the cost of equity, needed for WACC? Why do they differ from public company's method
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