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Valuation Final Exam

The document calculates the weighted average cost of capital (WACC) of a company using the given costs of equity and debt, percentages of equity and debt, and tax rate. It then provides a discounted cash flow (DCF) valuation of the company based on projected financial statements, assumptions of a discount rate of 10% and perpetual growth rate of 3%, and an exit multiple of 15x EBITDA. The DCF valuation results in an intrinsic value per share of $16.28, significantly below the current market price of $25 per share.

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Jeane Mae Boo
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100% found this document useful (1 vote)
320 views4 pages

Valuation Final Exam

The document calculates the weighted average cost of capital (WACC) of a company using the given costs of equity and debt, percentages of equity and debt, and tax rate. It then provides a discounted cash flow (DCF) valuation of the company based on projected financial statements, assumptions of a discount rate of 10% and perpetual growth rate of 3%, and an exit multiple of 15x EBITDA. The DCF valuation results in an intrinsic value per share of $16.28, significantly below the current market price of $25 per share.

Uploaded by

Jeane Mae Boo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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WACC= (Cost of Equity x % of Equity) + [(Cost of Debt x % of Debt)(1-Tax Rate)]

Cost of Equity 12%


% of Equity 65%
Cost of Debt 9.52%
% of Debt 35%
Tax Rate 34%
WACC 10.00%
2021 2022 2023 2024 2025

Sales 120,000 360,000 720,000 900,000 927,000


Cost 72,000 216,000 432,000 540,000 556,200
GP 48,000 144,000 288,000 360,000 370,800
SG & A 120,000 120,000 120,000 120,000 3,600
Depreciation Exp. 50,000 50,000 50,000 50,000 0
Amort. Exp. 1,538 1,538 1,538 1,538 1,538
Mis. Exp. 2,400 7,200 14,400 18,000 18,540
Loss in Old line 1,440 4,320 8,640 10,800 11,124
Total Expense 175,378 183,058 194,578 200,338 34,802
EBIT (127,378) (39,058) 93,422 159,662 335,998
Tax Rate (43,308.52) (13,279.72) 31,763.48 54,285.08 114,239.32
Net Income (84,069.48) (25,778.28) 61,658.52 105,376.92 221,758.68

Balance Sheet
Cash 200,000 200,000 200,000 200,000 206,000
AR 20,000 45,000 67,500 75,000 206,000
Inventory 12,000 18,000 36,000 45,000 46,350
Total Asset 232,000 263,000 303,500 320,000 458,350
Liabilities:
Accounts Payable 3,000 4500 9000 11250 11587.5
Total Liabilities 3,000 4,500 9,000 11,250 11,588
NWC 229,000 258,500 294,500 308,750 446,763
Changes in NWC 29,500 36,000 14,250 138,013
DISCOUNTED CASH FLOW OF PHOENIX PETROLEUM PHILIPPINES INCORPORATED.
Assumptions
This chart isn't available in your version of Ex
Tax Rate 34% Cash Flow
Discount Rate 10% $0 Editing this shape or saving this workbook int
Perpetural Growth Rate 3.00% -$20,000
1/1/2021 1/1/2022 1/1/2023 1/1/2024 1/1/2025 different file format will permanently break th
EV/EBITDA Mulltiple 15.0x -$40,000 -$32,531
-$60,000 -$49,798
Transaction Date 1/1/2021 -$63,007
-$80,000 -$70,513
Calendar Year End 12/31/2021 -$100,000
Current Price 25.00 -$120,000
Shares Outstanding 80,000 -$140,000
-$160,000
Debt 30,000
-$180,000 -$174,627
Cash 200,000 -$200,000
Capex -

Discounted Cash Flow Entry 2021 2022 2023 2024 2025 Exit Terminal Value
Date 1/1/2021 12/31/2021 12/31/2022 12/31/2023 12/31/2024 12/31/2025 12/31/2025 Perpetural Growth
Time Periods 0 1 2 3 4 EV/EBITDA
Year Fraction 1.00 1.00 1.00 1.00 1.00 Average
EBIT (127,378) (131,199) (135,135) (139,189) (143,365)
Less: Cash Taxes (43,309) (44,608) (45,946.01) (47,324.39) (48,744.121)
Plus: D&A 51,538 53,084 54,677 56,317 58,006
Less: Capex - - - - -
Less: Changes in NWC - 29,500 36,000 14,250 138,013
Unlevered FCF (32,531) (63,007) (70,513) (49,798) (174,627)
(Entry)/Exit (1,830,000) (1,925,106)
Transaction CF - (32,531) (63,007) (70,513) (49,798) (174,627) (1,925,106)
Transaction CF (1,830,000) (32,531) (63,007) (70,513) (49,798) (174,627) (1,925,106)

Intrinsic Value Market Value Rate of Return


Enterprise Value (1,472,496) Market Cap 2,000,000 Target Price Upside
Plus: Cash 200,000 Plus: Debt 30,000 Internal Rate of Return (IRR)
Less: Debt 30,000 Less: Cash 200,000
Equity Value (1,302,496) Enterprise Value 1,830,000 Market Value vs Intrinsic Value
Market Value
Equity Value/Share (16.28) Equity Value/Share 25.00 Upside
Intrinsic Value
ED.
isn't available in your version of Excel.

s shape or saving this workbook into a


ile format will permanently break the chart.

Terminal Value
Perpetural Growth (2,569,834)
(1,280,378.82)
(1,925,106)

Rate of Return
Target Price Upside -165%
Internal Rate of Return (IRR) Err:502

Market Value vs Intrinsic Value


25.00
(41.28)
Intrinsic Value (16.28)

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