Unlevered equity - Study guides, Class notes & Summaries

An unlevered firm has a cost of capital of 14% and earnings before interest and taxes of $150,000. A levered firm with the same operations and assets has both a book value and a face value of debt of $700,000 with a 7% annual coupon. The applicable tax rate is 35%. What is the value of the levered firm? - ANSWER-$941,429 Financial leverage impacts the performance of the firm by: - ANSWER-increasing the volatility of the firm's net income. Gail's Dance Studio is currently an all equity fi...

Name as many valuation methods as you can 1. Discounted cash flow analysis 2. Public company comparables 3. Precedent transactions analysis 4. Leveraged buyout analysis 5. Dividend discount model 6. Liquidation valuation 7. M&A premiums analysis 8. Future share price analysis 9. Sum of parts 10. Adjusted present value (APV) analysis 11. Embedded value methodology 12. Net asset value model 13. Residual income valuation What are the three ways that lowering tax can affect a DCF valuation? 1. Inc...

Walk me through a DCF - DCF values a company based not he PV of its Cash Flows and PV of its Terminal value 1) project out a company's financial using assumptions for revenue growth, expenses, and working capital to get FCF for each year 2) discount each year's FCF based on your discount rate - usually WACC 3) after getting the FCFs, determine terminal value by using the Multiples Method or Gordon Growth Method and then also discount this to Net Present Value using WACC 4) To get Enterprise V...

What are the line items for a DCF model? Sales COGS Gross Profit SG&A EBITDA Depreciation Amortization EBIT Tax rate Tax-effective EBIT Plus: Depreciation and Amortization Less: Capital Expenditures Less: Additions to Intangibles +- Changes in Working Capital Unlevered FCF What are the value drivers of a DCF model? Sales Growth COGS (as a % sales) SG&A (as a % sales) EBITDA Margin CapEx (as a % of sales) Depreciation (as a % of CapEx) Additions to Intangibles Amortization (amount) Changes in ...

Debt, equity - ANSWER-The value of a firm is defined to be the sum of the value of the firm's ______ and the firm's ______. Homogeneous expectations Homogeneous business risk classes Perpetual cash flows Perfect Capital markets - ANSWER-Assumptions of the M&M Model capital structure - ANSWER-Changes in ________ _________ primarily benefit the stockholders if the value of the firm increases. levered - ANSWER-A _______ firm pays less in taxes than an all-equity firm does. greater ...

2 Types of Valuation - Answer relative and intrinsic Relative Valuation - Answer methods that compare the price of a company to the market value of similar assets Intrinsic Valuation - Answer refers to the value of a company through fundamental analysis around its ability to generate cash flow; most common types is a discounted cash flow (DCF) analysis Enterprise value - Answer The total market value of a firm's equity and debt, less the value of its cash and marketable securities. It ...

FI 360 Final Exam Questions and Answers Latest (Graded). The feature in a bond indenture that requires systematic retirement of the bond issue is a planned call provision. sinking fund provision. forced conversion provision. mandated redemption provision. Question 2 6.5 / 6.5 pts Operating leverage describes the relationship between... EBIT and sales taxes and sales debt and equity fixed costs and variable costs Question 3 6.5 / 6.5 pts The risk-free rate is 5% and the expected re...

an investor puts $50 million of equity capital into a business in exchange for 90% equity stake. Three years later, the business is sold for 90 million transaction value. When its sold, it has $15 million of debt and $3 million of cash. What is the annualized return to the investor - Answer 12.0% an investor puts $50 million of equity capital into a business in exchange for 90% equity stake. Three years later, the business is sold for 90 million transaction value. When its sold, it has $10 mi...

DCF QUESTIONS AND ANSWERS . 100% ACCURATE, RATED A+ A company has a high debt load and is paying off a significant portion of its principal each year. How do you account for this in a DCF? - -Unlevered DCF you do not account for debt repayment because paying off debt shows up in the cash flow statement. If we were looking at Levered FCF than interest would decline. Cost of Equity tells us what kind of return an equity investor can expect for investing in a given company but what about...

Business Risk - Answer-The equity risk that comes from the nature of the firm' operating activities and directly related to the firm's operations. True - Answer-T/F: As the firm takes on more and more debt, the return on equity (ROE) increases. Financial Risk - Answer-The extra risk to shareholders that comes from debt financing. Lower - Answer-We can see at _____ levels of EBIT, debt is a disadvantage, as the burden of paying interest on the debt negatively affects EPS. (Lower or Hi...