Question

In: Finance

Use the following to answer questions 17-22. Relive the Fight, is a company that takes Capital...

Use the following to answer questions 17-22.

Relive the Fight, is a company that takes Capital citizens on tours of former Hunger Games arenas. The current owner, Effie Trinket has decided she no longer wants anything to do with the Hunger Games and has decided to sell the company. Caesar Flickerman is very excited when he finds out about her decision and has hired you to determine whether Effie's asking price of $5 million is fair. With the Quarter Quell coming up, sales are not expected to slow to the long-run growth rate until 2024, after which time they are projected to grow at a constant rate of 1% (characteristic of the industry).

The appropriate discount rate (WACC) is 10%. If Caesar purchases the firm, he will close (become the new owner) on January 1, 2021 (assume the current year is 2019). Use the firm's financial data provided below to answer the following questions. Round answers to the nearest dollar. *note: increase in NWC= CA-CL

Financial Data 2021

Total Revenue .............................$1,171,429

Cost of Goods Sold........ ................$300,000

Other general expenses……………$200,000

Depreciation and amortization.......$50,000

Capital Expenditures................... $10,000

Income Tax Rate............................30%

Current Assets ............................. $300,000

Current Liabilities.......................... $180,000

Long-term debt...............................$500,000

17. You have forecasted the firm's total revenue and expenses as above for 2021. What are the firm's free cash flows for 2021?

a) $205,000

b) $305,000

c) $315,000

d) $355,000

18. Assume you're forecasted FCF as follows:
2022 $380,000
2023 $400,000
2024 $425,000
What is the firm's terminal value?

a) $429,050

b) $3,902,272

c) $4,292,500

d) $4,769,444

19. What is the PV of the firm's 2021 FCF?

a) $355,000

b) $322,727

c) $380,000

d) $277,273

20. What is the firm's enterprise value?

a) $4,448,749

b) $4,451,891

c) $4,485,178

d) $4,893,464

21. What is the market value of the firm's common equity?

a) $4,105,178

b) $4,485,178

c) $4,785,178

d) $4,705,178

22. Should Caesar Flickerman proceed with purchasing the business?

a) Yes

b) No

Solutions

Expert Solution


Related Solutions

Use the following information to answer questions 22–24. On July 1, 20X0, CriCo takes out a...
Use the following information to answer questions 22–24. On July 1, 20X0, CriCo takes out a 10%, $10,000 note payable that is due on July 1, 20X1. No interest is accrued at year-end 20X0. 24. To correct this error in 20X0, you need to record just the adjusting entry that was not made because . . . a. an expense account is involved b. no error was made recording the note payable on July 1, 20X0 c. an accrual is...
Use the following to answer questions 20-22 Amy Co. has the following data related to an...
Use the following to answer questions 20-22 Amy Co. has the following data related to an item of inventory: Inventory, May 1 40 units @ $100 Purchase, May 7 70 units @ $80 Purchase, May 16 170 units @ $60 Ending Inventory 10 units 20. The value assigned to ending inventory if Amy uses LIFO is 21. The value assigned to cost of goods sold if Amy uses FIFO is 22. The value assigned to ending inventory if Amy uses...
Use the following data to answer the questions listed below: 17                    13 18           &nb
Use the following data to answer the questions listed below: 17                    13 18                    16 20                    24 15                    19 19                    12 10                    16 26                    27 13                    23 17                    15 24                    20 14                    21 26                    22 Using excel, compute the mean, median, range, and standard deviation of this sample. Create a table organized into bins starting with 10 and going up by 4 (10-13, 14-17, 18-21, etc.) Create a histogram that shows the distributions from part b. Describe the distribution shown on...
Use the following rates for Questions 17-20.
Use the following rates for Questions 17-20.Calculate ?3Calculate ???1,2Time0y1y 1y1y 2y1y 3y1y 4y1yRate3.00% 5.01% 7.03% 9.06% 11.10%Consider an investment that will pay a cash flow of $1000 at t = 1. What is the value of this investment today (e.g., at t = 0)?Now consider an investment that will pay a cash flow of $1000 at t = 4. What is the expected value of this investment in exactly 1 year (e.g., at t = 1).
Use the above information to answer Questions 1 - 17. Kentucky Hardware Company (KHC) is considering...
Use the above information to answer Questions 1 - 17. Kentucky Hardware Company (KHC) is considering an investment project that requires a new machine for producing special tools. This new machine costs $1,000,000 and will be depreciated over 10 years on a straight-line basis toward zero salvage value. KHC paid a consulting company $50,000 last year to help them decide whether there is sufficient demand for the special tools. In addition to the investment on the machine, KHC also invests...
Use the following information to answer questions 16 and 17: You sell short 100 shares of...
Use the following information to answer questions 16 and 17: You sell short 100 shares of Doggie Treats Inc. that are currently selling at $40 per share. You post the 50% margin required on the short sale. Your broker requires a 30% maintenance margin. 16) If the price falls to $30 short position in stocks and equity amounts are _______and_______, respectively. a. $3,000, $4,000 b. $2,000, $4,000 c. $3,000, $3,000 d. $4,000, $2,000 17) You will get a margin call...
Use the following information to answer questions 13 through 17. Sawyer, Selbo and Shaw (SSS), an...
Use the following information to answer questions 13 through 17. Sawyer, Selbo and Shaw (SSS), an investment management firm, has compiled the following information concerning Treasury securities: Maturity Coupon Y-T-M Price 0.5 Years 0 8.0% $ 96.15 1.0 Year 0 8.3% $ 92.19 1.5 Years 8.5% 8.9% $ 99.45 2.0 Years 9.0% 9.2% $ 99.64 2.5 Years 11.0% 9.4% $103.49 3.0 Years 9.5% 9.7% $ 99.49 3.5 Years 10.0% 10.0% $100.00 4.0 Years 10.0% 10.4% $ 98.72 4.5 Years 11.5%...
Select from the terms below to answer questions #17-22. One term is not used. R) Genomic...
Select from the terms below to answer questions #17-22. One term is not used. R) Genomic imprinting S) Methylation T) Sex-influenced inheritance U) Maternal inheritance V) Sex-limited inheritance W) Complementation X) X-linked inheritance Pattern baldness is controlled by two alleles: B, b. Females are bald if they are homozygous (BB) but males only need one allele B to be bald. This trait is an example of _________. A mother passes on her mitochondrial genes to all of her children, and...
QUESTION 1 Use the above information to answer Questions 1 - 17. Kentucky Hardware Company (KHC)...
QUESTION 1 Use the above information to answer Questions 1 - 17. Kentucky Hardware Company (KHC) is considering an investment project that requires a new machine for producing special tools.  This new machine costs $1,000,000 and will be depreciated over 10 years on a straight-line basis toward zero salvage value.  KHC paid a consulting company $50,000 last year to help them decide whether there is sufficient demand for the special tools.  In addition to the investment on the machine, KHC also invests $30,000...
Use the following information to answers questions 17 to 26.  (Long Answer/Essay – primarily Chapter 13 but...
Use the following information to answers questions 17 to 26.  (Long Answer/Essay – primarily Chapter 13 but includes concepts from many chapters) You are the CFO of Micro Spinoff Inc. The company has 3,000,000 shares of common stock outstanding at a market price of $50 a share. Micro Spinoff just paid an annual dividend in the amount of $3.12 per share. The dividend growth rate is 5.8 percent annually. Micro Spinoff also has 70,000 bonds outstanding with a face value of...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT