TUGAS FINANCIAL MANAGEMENT
Fery Purwa Ginanjar
Eksekutif B 26 B
1. Problem 3-5 ; Needham Pharmaceuticals has a profit margin of 3% and an equity multiplier of
2.0. Its sales are $100 million and it has total assets of $50 million. What is its ROE?
Answer :
ROE
= (Profit margin)(Total assets turnover)(Equity multiplier)
ROE
= (3%)(100/50)(2)
= 12,0%
2. Problem 3-6 ; Donaldson & Son has an ROA of 10%, a 2% profit margin, and a return on
equity equal to 15%. What is the company’s total assets turnover? What is the firm’s equity
multiplier?
Answer :
ROE
Equity multiplier
Equity multiplier
ROE
Total assets turnover
Total assets turnover
= ROA x Equity multiplier
= ROE / ROA
= 15% / 10%
= 1,5
= (Profit margin)(Total assets turnover)(Equity multiplier)
= ROE / (Profit margin)(Equity multiplier)
= 15% / (2%)(1,5)
=5
3. Problem 4-6 ; What is the future value of a 7%, 5-year ordinary annuity that pays $300 each
year? If this were an annuity due, what would its future value be?
Answer :
FVA5
FVA5
= PMT(1+i)N-1+ PMT(1+i)N-2+ PMT(1+i)N-3+ PMT(1+i)N-4+ PMT(1+i)N-5
= 300(1+0,07)5-1+300(1+0,07)5-2+300(1+0,07)5-3+300(1+0,07)5-4+300(1+0,07)5-5
= $1.725,22 (by excel =FV(0.07,5,-300,0,0))
FVA5 Due
FVA5 Due
= PMT [((1+i)n / i) – 1/i]
= 300[((1+0,07)5 / 0,07) – 1/0,07]
= $1.845,99 (by excel =FV(0.07,5,-300,0,1))
4. Problem 4-11 ; To the closest year, how long will it take $200 to double if it is deposited and
earns the following rates? [Notes: (1) See the Hint for Problem 4-9. (2) This problem cannot
be solved exactly with some financial calculators. For example, if you enter PV = –200, PMT
= 0, FV = 400, and I = 7 in an HP-12C and then press the N key, you will get 11 years for part
a. The correct answer is 10.2448 years, which rounds to 10, but the calculator rounds up.
However, the HP-10B gives the exact answer.]
a. 7%
b. 10%
c. 18%
d. 100%
Answer :
a. 7%
400
2
ln(2)
N
b. 10%
= 200(1+0,07)N
= (1+0,07)N
= N[(ln(1,07)]
= 0,693147 / 0,067659 = 10,24477 years
400
2
ln(2)
N
c. 18%
400
2
ln(2)
N
d. 100%
400
2
ln(2)
N
= 200(1+0,10)N
= (1+0,10)N
= N[(ln(1,10)]
= 0,693147 / 0,09531 = 7,272541 years
= 200(1+0,18)N
= (1+0,18)N
= N[(ln(1,18)]
= 0,693147 / 0,165514 = 4,187835 years
= 200(1+1,00)N
= (1+1,00)N
= N[(ln(2,00)]
= 0,693147 / 0,693147 = 1 year.
5. Problem 5-2 ; Wilson Wonders’s bonds have 12 years remaining to maturity. Interest is paid
annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds
sell at a price of $850. What is their yield to maturity?
Answer :
850
YTM
= 100 / (1+y)1+100 / (1+y)2+...+1.100 / (1+y)12
= 12,48%
6. Probelm 5.5 ; A Treasury bond that matures in 10 years has a yield of 6%. A 10-year
corporate bond has a yield of 9%. Assume that the liquidity premium on the corporate bond is
0.5%. What is the default risk premium on the corporate bond?
Answer :
rd
9,00
DRP
DRP
= r+ LP + DRP + MRP
= 6,00 + 0,50 + DRP + 0
= 9,00 – 6,00 – 0,50
= 2,50%
7. Problem 6.4 ;
Answer :
Demand for
the Company's
Products
1
Weak
Below average
Average
Above average
Strong
Sum
Probability
Deviation
Rate of Return If
Stock's
of This
Expected
from
Squared
This Demand
Expected
Demand
Return
Expected Deviation
Occurs (%)
Return
Occurring
Return
2
3
4=2x 3
5
5=2- 5
6 = (5)^2
0.1
-50.00%
-5.00%
11.40%
-61.40%
37.70%
0.2
-5.00%
-1.00%
11.40%
-16.40%
2.69%
0.4
16.00%
6.40%
11.40%
4.60%
0.21%
0.2
25.00%
5.00%
11.40%
13.60%
1.85%
0.1
60.00%
6.00%
11.40%
48.60%
23.62%
1
46.00%
11.40%
-11.00%
66.07%
Expected Return
=
Sum = Variance
=
Std. Dev = Square root of Variance
=
Coefficient of Variation
=
Sq. Dev x Prob
7=6x 1
3.77%
0.54%
0.08%
0.37%
2.36%
7.12%
11.40%
7.12%
26.68%
2.34
8. Problem 6.8 ; Suppose you hold a diversified portfolio consisting of a $7,500 investment in
each of 20 different common stocks. The portfolio’s beta is 1.12. Now, suppose you sell one
of the stocks with a beta of 1.0 for $7,500 and use the proceeds to buy another stock whose
beta is 1.75. Calculate your portfolio’s new beta.
Answer :
w
= 100%/20
= 5%
Beta Portofolio (bp)
= 1,12
Beta Portofolio (bpn)
Beta Portofolio (bpn)
= w1b1 + w2b2 + ... + w19b19 + w20b20
= 5%(1,12) + 5%(1,12) + ... + 5%(1,12) + 5%(1,75)
= 1,15
9. Problem 7.2 ; Boehm Incorporated is expected to pay a $1.50 per share dividend at the end
of this year (i.e., D1 = $1.50). The dividend is expected to grow at a constant rate of 7% a
year. The required rate of return on the stock, r s, is 15%. What is the value per share of
Boehm’s stock?
Answer :
P^0
= D1 / r s – g
= $1,50 / 15% - 7%
P^0
= $ 18,75
10. Problem 7.5 ; A company currently pays a dividend of $2 per share (D 0 = $2). It is estimated
that the company’s dividend will grow at a rate of 20% per year for the next 2 years, then at a
constant rate of 7% thereafter. The company’s stock has a beta of 1.2, the riskfree rate is
7.5%, and the market risk premium is 4%. What is your estimate of the stock’s current price?
Answer :
rRF
= 7,5%
bi
= 1,2
RPM
= 4,0%
rs
rs
= rRF + (RPM)bi
= 7,5% + (4,0%)1,2
= 12,30%
D0
rs
gs
gL
b
RPM
N
$2.0
12.3%
20.0% Short-run g; for Years 1-2 only
7.0% Long-run g; for all years after Year 3
1.2%
4.0%
4.00 (asumsi 4 tahun)
Growth Rate
Year
Dividends
0
$2.00
20%
1
$2.4
20%
2
$2.9
7%
3
$3.1
7%
4
$3.3
PV of dividends discounted at rs
Horizon value
Year 1
2.137133
Year 2
2.283668
Year 3
2.175890
6.596691 PV nonconstan dividends
43.92835 PV of horizon value
50.52504 P0
=
=
D4 / (rs-gL)
62.21343
11. Problem 8.4 ; The current price of a stock is $33, and the annual risk-free rate is 6%. A call
option with a strike price of $32 and with 1 year until expiration has a current value of $6.56.
What is the value of a put option written on the stock with the same exercise price and
expiration date as the call option?
Answer :
Put option
= VC – P + Xe -rRFt
Put option
= $6,56 - $33 + $32-0.06x1
Put option
= $3,74
12. Problem 8.7 ; The current price of a stock is $15. In 6 months, the price will be either $18 or
$13. The annual risk-free rate is 6%. Find the price of a call option on the stock that has a
strike price of $14 and that expires in 6 months. (Hint: Use daily compounding.)
Answer :
P
= $15
P(u)
= $18
P(d)
= $13
rRF
= 6%
X
= $14
Cu ending up option payoff
Cd ending down option payoff
Share of stock (Ns)
= Max(18-14) = $4
= Max(13-14) = $0
= Cu – Cd / P(u) – P(d)
= $4 - $0 / $18 - $13
Share of stock
= 0,8
Hedge portofolio’s payoff if stock is up = NsP(u) - Cu
= 0,8($18) - $3
= $10,4
Hedge portofolio’s payoff if stock is down
= NsP(d) – Cd
= 0,8($13) - $0
= $10,4
PV of riskless payoff
= $10,4 / (1+rRF/365)365(t/n)
= $7,8 / (1+0,06/365)365(0.5/1)
= $10,09
Option’s Value (VC)
= NsP - Present value of riskless payoff
= 0.8 x $15 - $10,09
= $1,91
13. Problem 9.7 ; Shi Importer’s balance sheet shows $300 million in debt, $50 million in
preferred stock, and $250 million in total common equity. Shi’s tax rate is 40%, rd = 6%, rps =
5.8%, and rs = 12%. If Shi has a target capital structure of 30% debt, 5% preferred stock, and
65% common stock, what is its WACC?
Answer :
WACC
= wdrd(1-T) + wpsrps + wsrs
= 0,3(6,0%)(1-0,4) + 0,05(5,8%) + 0,65(12%)
WACC
= 9,17%
14. Problem 9.11 ; Radon Homes’ current EPS is $6.50. It was $4.42 five years ago. The
company pays out 40% of its earnings as dividends, and the stock sells for $36.
a. Calculate the historical growth rate in earnings. (Hint: This is a 5-year growth period.)
b. Calculate the next expected dividend per share, D 1. (Hint: D0 = 0.4($6.50) = $2.60.)
Assume that the past growth rate will continue.
c. What is Radon Homes’ cost of equity, rs?
Answer :
a. Growth rate in earnings
Growth Rate
Year
Eps
0
$4.42
EPS/Year
Growth Rate / Year
9%
1
$4.8
($6.5 -$4.42) / 5
(Sum growth / year)
b. Expected dividend per share
D1
= D0(1+g)1
= $2,6 (1+0,08)1
D1
= $2,81
c.
rs
15. Problem 10.7 ;
Answer :
9%
2
$5.3
= (D1 / P0) + Expected g
= ($2,81 / $36) + 8%
= 15,81%
8%
3
$5.7
$0.42
8.0%
7%
4
$6.1
7%
5
$6.5
Sum
40%
Project cost of capital, r, for each project :
Name Project Initial Cost
0
Project A
(15,000,000)
Project B
(15,000,000)
NPV
Project A
Project B
r1
16,108,951.52
18,300,939.42
IRR
Project A
Project B
r1
5%
r2
10%
r3
15%
Net Cash Flows
1
2
3
5,000,000
10,000,000 20,000,000
20,000,000
10,000,000
6,000,000
r2
12,836,213.37
15,954,169.80
r3
10,059,587.41
13,897,838.42
43.97%
82.03%
16. Problem 10.12 ; After discovering a new gold vein in the Colorado mountains, CTC Mining
Corporation must decide whether to go ahead and develop the deposit. The most costeffective method of mining gold is sulfuric acid extraction, a process that could result in
environmental damage. Before proceeding with the extraction, CTC must spend $900,000 for
new mining equipment and pay $165,000 for its installation. The gold mined will net the firm
an estimated $350,000 each year for the 5-year life of the vein. CTC’s cost of capital is 14%.
For the purposes of this problem, assume that the cash inflows occur at the end of the year.
a. What are the project’s NPV and IRR?
b. Should this project be undertaken if environmental impacts were not a consideration?
c. How should environmental effects be considered when evaluating this, or any other,
project? How might these concepts affect the decision in part b?
Answer :
a.
Project cost of capital, r, for each project :
r
Name Project Initial Cost
Net Cash Flows
0
1
2
CTC Mining
(1,065,000)
350,000
350,000
NPV
CTC Mining
r1
136,578.34
IRR
CTC Mining
19.22%
14%
3
350,000
4
350,000
5
350,000
b. Yes, in quantitative methods this project is profitable because NPV positif and IRR higher
than cost of capital
c. Because, government rules and regulations constrain what companies can do with
environmental. For example, suppose a manufacturer is studying a proposed new plant.
The company could meet current environmental regulations at a cost of $1 million, but the
plant would still emit fumes that would cause some bad will in its neighborhood. Those ill
feelings would not show up in the cash flow analysis, but they should still be considered.
Perhaps a relatively small additional expenditure would reduce the emissions substantially,
make the plant look good relative to other plants in the area, and provide goodwill that in
the future would help the firm’s sales and its negotiations with governmental agencies.
17. Problem 11.5 ; Wendy is evaluating a capital budgeting project that should last for 4 years.
The project requires $800,000 of equipment. She is unsure what depreciation method to use
in her analysis, straight-line or the 3-year MACRS accelerated method. Under straight-line
depreciation, the cost of the equipment would be depreciated evenly over its 4-year life
(ignore the half-year convention for the straight-line method). The applicable MACRS
depreciation rates are 33%, 45%, 15%, and 7%, as discussed in Appendix 11A. The
company’s WACC is 10%, and its tax rate is 40%.
a. What would the depreciation expense be each year under each method?
b. Which depreciation method would produce the higher NPV, and how much higher would it
be?
Answer :
a. Depreciation expense
Under stright-line depreciation expense :
Equipment ($)
Depreciation
800,000.00
1
Depreciation Rate
Depreciation on Project Wendy's ($)
2
25%
200,000.00
3
25%
200,000.00
4
25%
200,000.00
Totals
25%
200,000.00
100%
800,000.00
Depreciation straight-line is $200.000,- peryear
Modified Accelerated Cost Recovery System (MACRS) depreciation expense :
Equipment ($)
Depreciation
Depreciation Rate
Depreciation on Project Wendy's ($)
800,000.00
1
2
33%
264,000.00
3
45%
360,000.00
4
15%
120,000.00
Totals
7%
56,000.00
100%
800,000.00
Depreciation MACRS is ; $264.000,- ; $360.000,- ; $120.000,- and $56.000,b. NPV
Equipment ($)
WACC
Tax rate
Depreciation
Depreciation USL
Sales
Cost
Depreciation
EBIT
Tax in operation
EAT
Add back depreciation
Project net cash flow
200,000.00
(200,000.00)
(80,000.00)
(120,000.00)
200,000.00
80,000.00
200,000.00
(200,000.00)
(80,000.00)
(120,000.00)
200,000.00
80,000.00
200,000.00
(200,000.00)
(80,000.00)
(120,000.00)
200,000.00
80,000.00
200,000.00
(200,000.00)
(80,000.00)
(120,000.00)
200,000.00
80,000.00
800,000.00
(800,000.00)
(320,000.00)
(480,000.00)
800,000.00
320,000.00
Depreciation MACRS
Sales
Cost
Depreciation
EBIT
Tax in operation
EAT
Add back depreciation
Project net cash flow
264,000.00
(264,000.00)
(105,600.00)
(158,400.00)
264,000.00
105,600.00
360,000.00
(360,000.00)
(144,000.00)
(216,000.00)
360,000.00
144,000.00
120,000.00
(120,000.00)
(48,000.00)
(72,000.00)
120,000.00
48,000.00
56,000.00
(56,000.00)
(22,400.00)
(33,600.00)
56,000.00
22,400.00
800,000.00
(800,000.00)
(320,000.00)
(480,000.00)
800,000.00
320,000.00
NPV USL
NPV MACRS
NPV MACRS Higher
800,000.00
10.00%
40.00%
1
($546,410.76)
($533,629.12)
($12,781.64)
NPV MACRS higher than USL $12.781,64
2
3
4
Totals
18. Problem 11.6 ; The Campbell Company is evaluating the proposed acquisition of a new
milling machine. The machine’s base price is $108,000, and it would cost another $12,500 to
modify it for special use. The machine falls into the MACRS 3-year class, and it would be sold
after 3 years for $65,000. The machine would require an increase in net working capital
(inventory) of $5,500. The milling machine would have no effect on revenues, but it is
expected to save the firm $44,000 per year in before-tax operating costs, mainly labor.
Campbell’s marginal tax rate is 35%.
a. What is the net cost of the machine for capital budgeting purposes? (That is, what is the
Year-0 net cash flow?)
b. What are the net operating cash flows in Years 1, 2, and 3?
c. What is the additional Year-3 cash flow (i.e., the after-tax salvage and the return of
working capital)?
d. If the project’s cost of capital is 12%, should the machine be purchased?
Answer :
a. Estimated Investment Requirements :
Pice equipment
Modification
Change in net working capital
Total investment
-$ 108.000,-$ 12.500,-$
5.500,-$ 126.000,-
Net cash flow year 0 is $ 126.000,-
b. Operating Cash Flows :
1
2
3
After-tax cost savings
Depreciation
Depreciation tax savings
Operating cash flow (1+3)
Year 1
Year 2
Year 3
28,600.00
39,765.00
13,917.75
42,517.75
28,600.00
54,225.00
18,978.75
47,578.75
28,600.00
18,075.00
6,326.25
34,926.25
Net operating cash flows year 1 $42.517,75 ; year 2 $47.578,75 and year 3
$34.926,25
c. Termination Cash Flows :
Salvage value ($)
Tax on salvage value ($)
Net working capital recovery ($)
Termination cash flow ($)
65,000.00
(19,797.75)
5,500.00
50,702.25
Calculation of tax salvage value :
Book value
= Depreciation basis - Accumulated Depreciation
= $120.500 - $112.065
= $8.435,Sales price
Less book value
Taxable income
Tax at 35%
$ 65,000.00
$ 8,435.00
$ 56,565.00
$ 19,797.75
Termination cash flows in year 3 is $50.702,25
d. Project NPV with cost of capital 12%
Cost of capital
12%
Year 0
Project cash flows
NPV project
Year 1
(126,000.00) 42,517.75
Year 2
Year 3
47,578.75
85,628.50
10,840.44
NPV is $10.840,44 = PURCHASED
19. Problem 12.3 ; Refer to Problem 12-1. Return to the assumption that the company had $3
million in assets at the end of 2010, but now assume that the company pays no dividends.
Under these assumptions, what would be the additional funds needed for the coming year?
Why is this AFN different from the one you found in Problem 12-1?
( Problem 12.1 Baxter Video Products’s sales are expected to increase by 20% from $5
million in 2010 to $6 million in 2011. Its assets totaled $3 million at the end of 2010. Baxter is
already at full capacity, so its assets must grow at the same rate as projected sales. At the
end of 2010, current liabilities were $1 million, consisting of $250,000 of accounts payable,
$500,000 of notes payable, and $250,000 of accruals. The aftertax profit margin is forecasted
to be 5%, and the forecasted payout ratio is 70%. Use the AFN equation to forecast Baxter’s
additional funds needed for the coming year ).
Answer :
S0
g
S1
gS0
A0
A0 / S0
L0
L0/S0
M
POR
= $ 5 million
= 20%
= S0 x (1 + g)
= $ 5 million x (1 + 20%) =$ 6 million
= S1 - S2=S
= $ 6 million - $ 5 million = $1milion
= $ 3 million
= $ 3 million / $ 5 million = 60,00%
= Accrual + Accounts payable
= $ 250.000 + $ 250.000 = $ 500.000,= $ 500.000 / $ 5.000.000 =10,00%
= 5%
= 70%
AFN
= Required Increase in Assets
= (A0 / S0)S
= (A0 / S0)(gS0)
= (0,60) x $ 1 million
= $ 600.000
= $ 200.000,-
AFN
= $ 200.000,-
– Spontaneous Increase
– (L0 / S0)S
– (L0 / S0)(gS0)
– (0,10) x $ 1 million
– $ 100.000,-
– Addition to Retained
– S1 x M x (1 – POR)
– (1 + g)S0 x M x (1 – POR)
– $ 6 million x 0,05 x (1 – 0)
– $ 200.000,-
20. Problem 12.5 ; At year-end 2010, Bertin Inc.’s total assets were $1.2 million and its accounts
payable were $375,000. Sales, which in 2010 were $2.5 million, are expected to increase by
25% in 2011. Total assets and accounts payable are proportional to sales, and that
relationship will be maintained. Bertin typically uses no current liabilities other than accounts
payable. Common stock amounted to $425,000 in 2010, and retained earnings were
$295,000. Bertin has arranged to sell $75,000 of new common stock in 2011 to meet some of
its financing needs. The remainder of its financing needs will be met by issuing new long-term
debt at the end of 2011. (Because the debt is added at the end of the year, there will be no
additional interest expense due to the new debt.) Its profit margin on sales is 6%, and 40% of
earnings will be paid out as dividends.
a. What were Bertin’s total long-term debt and total liabilities in 2010?
b. How much new long-term debt financing will be needed in 2011?
(Hint: AFN − New stock = New long-term debt.)
Answer :
A0
= $ 1.2 million
Account payable = L0 = $ 375.000,“Bertin typically uses no current liabilities other than accounts payable”
Sales 2010 (S0)
= $ 2,5 million
g
= 25%
Sales 2011 (S1)
= S0 x (1 + g)
= $ 2,5 million x (1 + 25%)
= $ 3,125 million
gS0
= S1 - S2 = S
= $ 3,125 million - $ 2,5 million
= $ 625.000,A0 / S0
= $ 1,2 million / $ 2,5 million
= 48%
L0 / S0
= $ 375.000,- / $ 2,5 million
= 15%
Common stock
= $ 425.000,Retained earnings
= $ 295.000,Stock sell 2011
= $ 75.000,M
= 6%
POR
= 40%
“Total assets & Account payable are proportional to Sales”
INCOME STATEMENT
Sales
Costs expect depreciation
Depreciation
Total operating cost
EBIT
Lest interest (INT)
Earning before taxes (EBT)
Taxes
Income before pref. Dividends
Preferred dividends
Net income of common (NI)
Dividends to common (DIVs)
Add. To retained earnings : (NI-DIVs)
Shares of common stock
Earning per Share (EPS)
Dividends per Share (DPS)
Price per share (P)
2010
2011
2,500.00
-
2,500.00
-
2,500.00
-
2,500.00
-
2,500.00
-
BALANCE SHEETS
Assets
Cash
ST Investments
Account receivable
Inventories
Total current assets
Net plant and equip
Total assets
Liabilities and equity
Account payable
Accruals
Notes payable
Total current liab
Long-term debt
Total liabilities
Preffered stock
Common stock
Retained earnings
Total common equity
Total liab. & equity
2010
2011
0
0
1,200.00
-
375.00
375.00
105.00
480.00
-
425.00
295.00
720.00
1,200.00
-
a. Total long term debt and Total liablities 2010 :
Total assets 2010
= Total liabilities 2010 + Total common equity 2010
$ 1,2 miliion
= (Total current liab + Total longterm debt) + $ 720.000,$ 1,2 miliion
= ( $ 375.000,- + Total longterm debt) + $ 720.000,Total long term debt
= $ 105.000,Total liabilities
= (Total current liab + Total longterm debt)
= ( $ 375.000,- + $ 105.000,-)
Total liabilities
= $ 480.000,-
b. Long term debt 2011 (Hint: AFN − New stock = New long-term debt.)
AFN = Required Increase in Assets
= (A0 / S0)S
= (A0 / S0)(gS0)
= (0,48) x $ 625.000
= $ 300.000
= $ 93.750,-
– Spontaneous Increase
– (L0 / S0)S
– (L0 / S0)(gS0)
– (0,15) x $ 625.000,– $ 93.750,-
– Addition to Retained
– S1 x M x (1 – POR)
– (1 + g)S0 x M x (1 – POR)
– $3,125million x0,06x(1-0,4)
– $ 112.500,-
(Hint: AFN − New stock = New long-term debt.)
New long term debt
= AFN – New stock
= $ 93.750,- – $ 75.000,New long term debt
= $ 18.750,-
21. Problem 13.3 ;
Answer :
Growth (g)
= ($ 707,55 – $ 667,50) / ($ 667,50)
= ($ 40,05) / ($ 667,50)
= 6,00%
Vop(12)
= $ 707,55 (1 + 6,00%) / 11,00% - 6,00%
Vop(12)
= $ 750,003 / 5,00%
Vop(12)
= $ 15.000,06
22. Problem 13.6 ; Brooks Enterprises has never paid a dividend. Free cash flow is projected to
be $80,000 and $100,000 for the next 2 years, respectively; after the second year, FCF is
expected to grow at a constant rate of 8%. The company’s weighted average cost of capital is
12%.
a. What is the terminal, or horizon, value of operations? (Hint: Find the value of all free cash
flows beyond Year 2 discounted back to Year 2.)
b. Calculate the value of Brooks’s operations.
Answer :
a. Terminal, horizon, value of operations (Hint: Find the value of all free cash flows
beyond Year 2 discounted back to Year 2.) :
WACC
g
= 12,00%
= 8,00%
Vop(2)
= $ 100.000 x (1 + 8,00%) / 12,00% - 8,00%
Vop(2)
= $ 108.000 / 4,00%
Vop(2)
= $ 2.700.000,-
b. Value of Brook’s operations :
Free Cash Flows ($)
80,000.00
PV Year 1
PV Year 2
PV of horizon value
71,428.57
79,719.39
2,152,423.47
Value of operations
2,303,571.43
100,000.00
Horizon value
108,000.00
4.00%
2,700,000.00