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1. You are evaluating a project for a local private equity fund, and they have provided the data below. The value of a firm can be calculated as the sum of a series of cash flows over time, as shown in the following formula. V 0 = Where: CFA + (1 + WACC)¹ CFA2 (1 + WACC)² CFA3 +...+ + (1 + WACC)³ CFA+V+ (1 + WACC)* CFA t+1 V = WACC - 9. t+1 CFA is "free cash flow" or FCF. And: WACC 15.67% FCF (mn $) $134 g1 4.13% g2 5.69% g3 (and beyond) 2.65% a) What is the value of the company under analysis? Provide the result of $000 (mn). WACC (E/V)× RE + (D/V) × RDX (1 - TC) 2. You will be working as an analyst for Berkshire Hathaway. To prepare for their interview, you were told they use different ways to calculate the cost of capital of the companies they buy. One of them is the Weighted Cost of Capital or WACC. The BH team provided the following data and asked you to calculate the WACC of a target company they are evaluating for acquisition. (in millions) Value of Equity $275 Yield of Debt 7.53% Value of Debt $897 Tax rate 13.51% Return equity 15.21% a. What is the company's total value using the value of debt and equity? Provide the result as $000 (mn). b. What is the weighted average cost of capital? Provide the result as x.xx%.

1. You are evaluating a project for a local private equity fund, and they have provided the data below. The value of a firm can be calculated as the sum of a series of cash flows over time, as shown in the following formula. V 0 = Where: CFA + (1 + WACC)¹ CFA2 (1 + WACC)² CFA3 +...+ + (1 + WACC)³ CFA+V+ (1 + WACC)* CFA t+1 V = WACC - 9. t+1 CFA is "free cash flow" or FCF. And: WACC 15.67% FCF (mn $) $134 g1 4.13% g2 5.69% g3 (and beyond) 2.65% a) What is the value of the company under analysis? Provide the result of $000 (mn). WACC (E/V)× RE + (D/V) × RDX (1 - TC) 2. You will be working as an analyst for Berkshire Hathaway. To prepare for their interview, you were told they use different ways to calculate the cost of capital of the companies they buy. One of them is the Weighted Cost of Capital or WACC. The BH team provided the following data and asked you to calculate the WACC of a target company they are evaluating for acquisition. (in millions) Value of Equity $275 Yield of Debt 7.53% Value of Debt $897 Tax rate 13.51% Return equity 15.21% a. What is the company's total value using the value of debt and equity? Provide the result as $000 (mn). b. What is the weighted average cost of capital? Provide the result as x.xx%.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 1CMA
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1. You are evaluating a project for a local private equity fund, and they have provided the data below. The value of a firm can be calculated as the sum of a series of cash flows over time, as shown in the following formula. V 0 = Where: CFA + (1 + WACC)¹ CFA2 (1 + WACC)² CFA3 +...+ + (1 + WACC)³ CFA+V+ (1 + WACC)* CFA t+1 V = WACC - 9. t+1 CFA is "free cash flow" or FCF. And: WACC 15.67% FCF (mn $) $134 g1 4.13% g2 5.69% g3 (and beyond) 2.65% a) What is the value of the company under analysis? Provide the result of $000 (mn).
Transcribed Image Text:1. You are evaluating a project for a local private equity fund, and they have provided the data below. The value of a firm can be calculated as the sum of a series of cash flows over time, as shown in the following formula. V 0 = Where: CFA + (1 + WACC)¹ CFA2 (1 + WACC)² CFA3 +...+ + (1 + WACC)³ CFA+V+ (1 + WACC)* CFA t+1 V = WACC - 9. t+1 CFA is "free cash flow" or FCF. And: WACC 15.67% FCF (mn $) $134 g1 4.13% g2 5.69% g3 (and beyond) 2.65% a) What is the value of the company under analysis? Provide the result of $000 (mn).
WACC (E/V)× RE + (D/V) × RDX (1 - TC) 2. You will be working as an analyst for Berkshire Hathaway. To prepare for their interview, you were told they use different ways to calculate the cost of capital of the companies they buy. One of them is the Weighted Cost of Capital or WACC. The BH team provided the following data and asked you to calculate the WACC of a target company they are evaluating for acquisition. (in millions) Value of Equity $275 Yield of Debt 7.53% Value of Debt $897 Tax rate 13.51% Return equity 15.21% a. What is the company's total value using the value of debt and equity? Provide the result as $000 (mn). b. What is the weighted average cost of capital? Provide the result as x.xx%.
Transcribed Image Text:WACC (E/V)× RE + (D/V) × RDX (1 - TC) 2. You will be working as an analyst for Berkshire Hathaway. To prepare for their interview, you were told they use different ways to calculate the cost of capital of the companies they buy. One of them is the Weighted Cost of Capital or WACC. The BH team provided the following data and asked you to calculate the WACC of a target company they are evaluating for acquisition. (in millions) Value of Equity $275 Yield of Debt 7.53% Value of Debt $897 Tax rate 13.51% Return equity 15.21% a. What is the company's total value using the value of debt and equity? Provide the result as $000 (mn). b. What is the weighted average cost of capital? Provide the result as x.xx%.
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