代写Corporate and International Finance (N1563) Seminar 9代写Java编程

Corporate and International Finance (N1563)

Seminar 9

SHORT ANSWER

1) Discuss the advantages and limitations of using the weighted average cost of capital as a discount rate to evaluate capital budgeting projects.

2) Briefly explain how WACC can be used for valuing a business.

3) Under which circumstances would it be better to use the adjusted present value approach versus the WACC approach?

4) Briefly explain how APV can be used for valuing a business.

PROBLEM-BASED QUESTIONS

5) Consider the following data:

FCF1 = $20 million; FCF2 = $20 million; FCF3 = $20 million. Assume that free cash flow grows at a rate of 5% for year 4 and beyond. If the weighted average cost of capital is 12%, calculate the value of the firm.

6) The management of Chiara della Palma has made the projections shown below in Table 1. Use this table as starting point to value the company as a whole. The WACC for Chiara is 12% and the long-run growth rate from year 5 is 4%. The company has $5 million debt and 865,000 shares outstanding. What is the value per share?

 

Table 1: Cash flow projections for Chiara ($ thousands)