Assume the company has no existing cash pre deal. LTM EBITDA at entry Entry and exit EV/EBITDA multiple Amount of acquisition debt financing Total amount of debt paid off by exit Exit year Expected yearly EBITDA growth rate 181.3 8.1 X 768.3 198 4 3.7%
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The answer is 12.7% but i need an explanation.
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- Using information about the following company, calculate the share premium /(discount) a private equity house will be willing to pay for the Company. Assume pre deal net debt is refinanced. Assume the company has no dilutive securities. Required IRR 21.6% Total debt immediately after the LBO 550.5 Exit multiple (EV/EBITDA) 8.4 x EBITDA % growth per year 7.5% 3 Exit year % of debt remaining at exit Current share price Shares outstanding LTM EBITDA Pre deal net debt 57.2% 16.9 45.2 157.9 251.8Use Table 8 to answer the next two questions. Assume the committed capital is $100, the management fee is 2.00%, and the carried interest is 20.00%. Year Called-down Paid in capital Mgmt Fees $26 $31 $21 $10 $12 2015 2016 2017 2018 2019 What is the carried interest in 2019? O $9.85 O $5.40 $9.12 4 O $11.20 Table 8 Operating NAV before Carried NAV after Results Distributions Interest Distributions Distributions -$14 $6 $11 $41 $46 $5 $10 हैc. A non-dividend paying financial asset has a price of $200 and a oneyearfuture on this asset has price equal to $215. If the continuouslycompounded rate of interest is 3%, show that one can make an arbitrageprofit and design a strategy to earn that profit.
- Determining PB Ratio for Companies with Different Returns and Growth Assume that the present value of expected ROPI follows a perpetuity with growth g (Value = Amount/ [r - g]). Determine the theoretically correct PB ratio for each of the following companies A and B. Note: NOPAT = NOA » RNOA. Company Net Operating Assets Equity RNOA ROE Weighted Avg. Cost of Capital Growth Rate in ROPI $100 $100 19% 19% 10% 2% $100 $100 12% 12% 10% 4% A B Round answers to two decimal places. PB Ratio Company A Company BUse Table 8 to answer the next two questions. Assume the committed capital is $100, the management fee is 2.00%, and the carried interest is 20.00%. Year 2015 2016 2017 2018 2019 $5.40 What is the carried interest in 2019? Called-down Paid in capital Mgmt Fees $26 $31 $21 O $11.20 $9.12 $9.85 $10 $12 Table 8 Operating NAV before Carried NAV after Results Distributions Interest Distributions Distributions -$14 $6 $11 $41 $46 $5 $10Calculate the cost of equity with the CAPM Calculate the cost od debt based on what the company is currently paying for its debt - Beta of the industry = 1.16 - Equity Risk Premium = 6.97% - Risk-free rate = 3.77% - Objective capital structure of the industry = 13.24%
- Estimate the Cost of Capital for Company XYZ based on the information below. $50.00 $1.60 Stock price: Dividend: Beta: 1.29 Shares outstanding: 5-year dividend growth: 100,000,000 7.55% Risk-free rate: 0.60% Market risk premium: 7.00% Debt Information (bonds outstanding) Book Value "Quoted Price" Maturity YTM $800,000,000 3/15/2025 4.0% 99.00 $200,000,000 2/1/2027 4.5% 130.00 $500,000,000 9/1/2042 5.0% 95.00 $900,000,000 10/15/2044 5.5% 90.00The following table shows the projected free cash flows of an acquisition target. The potential acquirer wants to estimate its maximum acquisition price at an 8 percent discount rate and a terminal value in year 5 based on the perpetual growth equation with a 4 percent perpetual growth rate. Year Free cash flow 1 2 -840 -420 Maximum acquisition price 3 a. Estimate the target's maximum acquisition price. (Do not round Intermediate calculations. Round your answer to the nearest whole dollar amount.) 4 5 224 748 Maximum acquisition price b. Estimate the target's maximum acquisition price when the discount rate is 7 percent and the perpetual growth rate is 5 percent. (Do not round Intermediate calculations. Round your answer to the nearest whole dollar amount.)Consider the following information regarding Kent Ltd, a listed company on ASX in Australia. For the year ended 2018 For the year ended 2019 For the year ended 2020 EPS $1.875 $2.975 DPS $0.725 $0.925 Book Value of Share $30.00 Required Equity Return 7% Share Price on ASX $32.25 Assuming Depression will close operations in 2 years’ time, what would be the residual Income in 2020? Select one: a. $0.2565 per share b. $0.2145 per share c. $0.3950 per share d. $0.7945 per share
- You are looking to purchase Company A. Your projections for the EBITDA of Company A are as follows: EBITDA $21.51 Year 1 $2.0 O $19.77 $21.78 Your cost of capital is 20%. Your investment banker shows you the EBITDA multiples for the following comparable companies: Company x 5.0x Company y 5.50x Company z 6.0x Year 2 $3.0 Given the above information what is the price that you would like to offer to Company A shareholders? Not enough information Year 3 $3.5 None of the above Year 4 $4.0 Year 5 $5.0Estimating Share Value Using the DCF Model Following are forecasted sales, NOPAT, and NOA for Colgate-Palmolive Company for 2019 through 2022. Note: Complete the entire question in Excel and format each answer to two decimal places. Then enter the answers into the provided spaces below with two decimal places. a. Forecast the terminal period values assuming the following terminal period growth rate. Assumption Terminal period growth rate 1% Reported Forecast Horizon Period Terminal $ millions 2018 2019 2020 2021 2022 Period Sales $15,544 $16,010 $16,491 $16,985 $17,495 Answer NOPAT 2,737 2,818 2,902 2,989 3,079 Answer NOA 5,837 6,012 6,193 6,378 6,570 Answer b. Estimate the value of a share of Colgate-Palmolive common stock using the discounted cash flow (DCF) model using the following assumptions and the information above. Assumptions Discount rate (WACC) 5.70% Common shares outstanding 863.0 million Net…6. Merger analysis - Free cash flow to equity (FCFE) approach Consider the following acquisition data regarding Washington Company and Purple Turtle Corp.: Washington Company is considering an acquisition of Purple Turtle Corp. Washington Company estimates that acquiring Purple Turtle will result in incremental value for the firm. The analysts involved in the deal have collected the following information from the projected financial statements of the target company. Data Collected (in millions of dollars) Year 1 Year 2 Year 3 EBIT $11.0 $13.2 $16.5 Interest expense 3.0 3.3 3.6 Debt 34.1 40.3 43.4 Total net operating capital 105.1 107.1 109.1 Purple Turtle is a publicly traded company, and its market-determined pre-merger beta is 1.60. You also have the following information about the company and the projected statements. • Purple Turtle currently has a $12.00 million market value of equity and $7.80 million in debt. •The risk-free rate is 5% with a 7.10% market risk premium, and the…