EBIT, TARGET DEBT %, TAX RATES- to compute Value of Firm, Equity Value
Please suggest/advise/discuss on the following:
In an exam question, the details provided are:
Company’s EBIT FOR 5 YEARS,
Tax Rate for 5 years
Cost of Debt (5%)
Weighted Average Capital Cost (12%)
Target Debt % (10%)
Debt’s Market Value 35 Million
Yearly Capex amount for 5 years
Yearly Depreciation amount for 5 years
annual change in working capital data for 5 years
2 Scinarios were given.
In scenario 1, there is no assumption.
In scenario 2, there is an assumption that from 4th year Capex will increase by 20%.
The Examiner asked the candidate to compute:
Value of the Business? (in both scenarios separately)
Value of Equity?
FCFF for Year 0 (zero) ?
# Fellow friends/students/qualified- have you come across similar example or exercise in any textbook/ study notes.