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ALL WORK FOR THIS ASSIGNMENT IS TO BE DONE IN EXCEL ONLY.NO OTHER DOCUMENT FORMAT WILL BE ACCEPTABLE.INDIVIDUAL WORK IS ONLY ACCEPTABLE. FINAL PROJECT PRACTICE Define WACC and what components comprise WACC. You are to complete the WACC for your company. You should include your calculation for CAPM, after-tax debt rate, weights for the financing based on current trading value. You should show each component in Excel with formulas and do not forget that Yahoo finance has much of this information along with Bank Rate.com and the 10-K.(30 points)Define capital budgeting. What makes a good decision criteria for capital budgeting?Define IRR and NPV.Standard Grounds Co. is presented with the following two mutually exclusive projects.The required return is 9%. (10 Points) For each problem, provide a 1-2 sentence explanation of each answer, which will have points for each question. What is the IRR, NPV, payback and indifferent point for each project?Which, if either, of the projects should the company accept? Sumo Corp. has come up with a new product, the Exacter Freezer.Sumo paid \$167,000 for the marketing survey to determine the viability of the product. It is felt that the product will generate sales of \$575,000 per year.The fixed cost associated with the project will be \$162,000 per year, and the variable costs will amount to 14.5% of sales.The equipment necessary for production will cost \$650,000 and will be depreciated on straight-line over five years with no residual value.Sumo is in a 20% tax return and the required rate of return is 26%.Calculate the payback period, NPV and IRR as well as the indifference point.Keep in mind that you will need to build a simple income statement to determine after-tax net income and then derive quick cash flow to calculate the requirements. (10 points)What are the three view of market efficiency and which one do you believe in?A stock has an expected return of 13% with a beta of 1.25 and a risk free rate of 2.6%.What is the risk-adjusted return on equity? (10 points)

Unformatted Attachment Preview

Time Value of Money
Rate
Periods
How Often
PV
PVA
FV
11.00%
15.00%
8.00%
26
25
1
1
1
1
Payment
\$12,000.00
FV
\$580,000,000.00
PV
\$38,461,883.24
\$
\$
\$
\$
10,823.02
29,411.69
128,928.43
72,388.42
\$
\$
\$
\$
70,985.52
72,943.94
73,996.85
74,728.74
\$394,632,000.00
\$77,569.79
\$
\$
\$
\$
11,582.60
25,678.44
37,347.22
77,569.79
11.6%
9.59%
\$365,400,000.00
\$
\$
\$
\$
8,503.60
25,520.93
346,796.33
935,935.14
FVA
RATE
8.00%
9.59%
1
7
25
1
\$0.00
\$1,718
\$905.00
\$
\$
\$
\$
18,866.84
81,456.34
360,262.21
2,553,516.21
PERIOD
Perpetuity
infinite series of equal payments
PV=C/r
C-Current Return
r-Rate
C
r
Perpetuity
Amortization Table
Loan Amount
Rate on the Loan
Length of Loan
Periods
\$23,000
6.0%
15
12
Payment
Total Pmts
Total Int
\$194.09
\$34,935.67
\$11,935.67
Period
Beg Bal
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
\$23,000
\$22,921
\$22,841
\$22,762
\$22,681
\$22,601
\$22,520
\$22,438
\$22,356
\$22,274
\$22,191
\$22,108
\$22,024
\$21,940
\$21,856
\$21,771
\$21,686
\$21,600
\$21,514
\$21,428
\$21,341
\$21,253
\$21,166
\$21,077
\$20,989
\$20,900
\$20,810
\$20,720
\$20,629
\$20,538
\$20,447
\$20,355
\$20,263
\$20,170
\$20,077
Pmt
Prin Pmt
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$79.09
\$79.48
\$79.88
\$80.28
\$80.68
\$81.08
\$81.49
\$81.90
\$82.31
\$82.72
\$83.13
\$83.55
\$83.96
\$84.38
\$84.81
\$85.23
\$85.66
\$86.09
\$86.52
\$86.95
\$87.38
\$87.82
\$88.26
\$88.70
\$89.14
\$89.59
\$90.04
\$90.49
\$90.94
\$91.39
\$91.85
\$92.31
\$92.77
\$93.24
\$93.70
Int pmt
\$115.00
\$114.60
\$114.21
\$113.81
\$113.41
\$113.00
\$112.60
\$112.19
\$111.78
\$111.37
\$110.96
\$110.54
\$110.12
\$109.70
\$109.28
\$108.86
\$108.43
\$108.00
\$107.57
\$107.14
\$106.70
\$106.27
\$105.83
\$105.39
\$104.94
\$104.50
\$104.05
\$103.60
\$103.15
\$102.69
\$102.24
\$101.78
\$101.31
\$100.85
\$100.38
36
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72
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74
75
76
77
78
79
80
81
82
\$19,983
\$19,889
\$19,794
\$19,699
\$19,604
\$19,508
\$19,411
\$19,314
\$19,217
\$19,119
\$19,020
\$18,921
\$18,822
\$18,722
\$18,621
\$18,520
\$18,419
\$18,317
\$18,214
\$18,111
\$18,008
\$17,904
\$17,799
\$17,694
\$17,588
\$17,482
\$17,375
\$17,268
\$17,160
\$17,052
\$16,943
\$16,834
\$16,724
\$16,614
\$16,503
\$16,391
\$16,279
\$16,166
\$16,053
\$15,939
\$15,825
\$15,710
\$15,594
\$15,478
\$15,361
\$15,244
\$15,126
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$94.17
\$94.64
\$95.12
\$95.59
\$96.07
\$96.55
\$97.03
\$97.52
\$98.00
\$98.49
\$98.99
\$99.48
\$99.98
\$100.48
\$100.98
\$101.49
\$101.99
\$102.50
\$103.02
\$103.53
\$104.05
\$104.57
\$105.09
\$105.62
\$106.15
\$106.68
\$107.21
\$107.75
\$108.28
\$108.83
\$109.37
\$109.92
\$110.47
\$111.02
\$111.57
\$112.13
\$112.69
\$113.26
\$113.82
\$114.39
\$114.96
\$115.54
\$116.12
\$116.70
\$117.28
\$117.87
\$118.46
\$99.92
\$99.45
\$98.97
\$98.50
\$98.02
\$97.54
\$97.06
\$96.57
\$96.08
\$95.59
\$95.10
\$94.61
\$94.11
\$93.61
\$93.11
\$92.60
\$92.09
\$91.58
\$91.07
\$90.56
\$90.04
\$89.52
\$88.99
\$88.47
\$87.94
\$87.41
\$86.88
\$86.34
\$85.80
\$85.26
\$84.72
\$84.17
\$83.62
\$83.07
\$82.51
\$81.96
\$81.39
\$80.83
\$80.26
\$79.70
\$79.12
\$78.55
\$77.97
\$77.39
\$76.81
\$76.22
\$75.63
83
84
85
86
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89
90
91
92
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95
96
97
98
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109
110
111
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113
114
115
116
117
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119
120
121
122
123
124
125
126
127
128
129
\$15,008
\$14,889
\$14,769
\$14,649
\$14,528
\$14,407
\$14,285
\$14,162
\$14,039
\$13,915
\$13,790
\$13,665
\$13,539
\$13,413
\$13,286
\$13,158
\$13,030
\$12,901
\$12,771
\$12,641
\$12,510
\$12,379
\$12,247
\$12,114
\$11,980
\$11,846
\$11,711
\$11,576
\$11,439
\$11,302
\$11,165
\$11,027
\$10,888
\$10,748
\$10,608
\$10,467
\$10,325
\$10,182
\$10,039
\$9,895
\$9,751
\$9,605
\$9,459
\$9,313
\$9,165
\$9,017
\$8,868
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$119.05
\$119.64
\$120.24
\$120.84
\$121.45
\$122.05
\$122.66
\$123.28
\$123.89
\$124.51
\$125.14
\$125.76
\$126.39
\$127.02
\$127.66
\$128.30
\$128.94
\$129.58
\$130.23
\$130.88
\$131.54
\$132.19
\$132.85
\$133.52
\$134.19
\$134.86
\$135.53
\$136.21
\$136.89
\$137.57
\$138.26
\$138.95
\$139.65
\$140.35
\$141.05
\$141.75
\$142.46
\$143.17
\$143.89
\$144.61
\$145.33
\$146.06
\$146.79
\$147.52
\$148.26
\$149.00
\$149.75
\$75.04
\$74.44
\$73.85
\$73.24
\$72.64
\$72.03
\$71.42
\$70.81
\$70.19
\$69.57
\$68.95
\$68.33
\$67.70
\$67.06
\$66.43
\$65.79
\$65.15
\$64.50
\$63.86
\$63.21
\$62.55
\$61.89
\$61.23
\$60.57
\$59.90
\$59.23
\$58.56
\$57.88
\$57.20
\$56.51
\$55.82
\$55.13
\$54.44
\$53.74
\$53.04
\$52.33
\$51.62
\$50.91
\$50.20
\$49.48
\$48.75
\$48.03
\$47.30
\$46.56
\$45.83
\$45.08
\$44.34
130
131
132
133
134
135
136
137
138
139
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141
142
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156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
\$8,718
\$8,568
\$8,416
\$8,264
\$8,112
\$7,958
\$7,804
\$7,649
\$7,493
\$7,336
\$7,179
\$7,021
\$6,862
\$6,702
\$6,541
\$6,380
\$6,218
\$6,055
\$5,891
\$5,726
\$5,561
\$5,394
\$5,227
\$5,059
\$4,891
\$4,721
\$4,550
\$4,379
\$4,207
\$4,034
\$3,860
\$3,685
\$3,510
\$3,333
\$3,156
\$2,977
\$2,798
\$2,618
\$2,437
\$2,255
\$2,072
\$1,889
\$1,704
\$1,518
\$1,332
\$1,144
\$956
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$150.50
\$151.25
\$152.01
\$152.77
\$153.53
\$154.30
\$155.07
\$155.84
\$156.62
\$157.41
\$158.19
\$158.98
\$159.78
\$160.58
\$161.38
\$162.19
\$163.00
\$163.81
\$164.63
\$165.46
\$166.28
\$167.11
\$167.95
\$168.79
\$169.63
\$170.48
\$171.33
\$172.19
\$173.05
\$173.92
\$174.79
\$175.66
\$176.54
\$177.42
\$178.31
\$179.20
\$180.10
\$181.00
\$181.90
\$182.81
\$183.73
\$184.64
\$185.57
\$186.50
\$187.43
\$188.37
\$189.31
\$43.59
\$42.84
\$42.08
\$41.32
\$40.56
\$39.79
\$39.02
\$38.24
\$37.46
\$36.68
\$35.89
\$35.10
\$34.31
\$33.51
\$32.71
\$31.90
\$31.09
\$30.27
\$29.45
\$28.63
\$27.80
\$26.97
\$26.14
\$25.30
\$24.45
\$23.60
\$22.75
\$21.90
\$21.03
\$20.17
\$19.30
\$18.43
\$17.55
\$16.67
\$15.78
\$14.89
\$13.99
\$13.09
\$12.18
\$11.28
\$10.36
\$9.44
\$8.52
\$7.59
\$6.66
\$5.72
\$4.78
177
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188
189
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
\$767
\$576
\$385
\$193
(\$0)
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$190.25
\$191.20
\$192.16
\$193.12
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$3.83
\$2.88
\$1.93
\$0.97
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
#NUM!
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
23000
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$194.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$79.09
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
\$115.00
End Bal
\$23,000
\$22,920.91
\$22,841.43
\$22,761.55
\$22,681.27
\$22,600.59
\$22,519.51
\$22,438.02
\$22,356.12
\$22,273.81
\$22,191.10
\$22,107.96
\$22,024.42
\$21,940.45
\$21,856.07
\$21,771.26
\$21,686.03
\$21,600.37
\$21,514.29
\$21,427.77
\$21,340.82
\$21,253.44
\$21,165.62
\$21,077.36
\$20,988.66
\$20,899.52
\$20,809.93
\$20,719.89
\$20,629.40
\$20,538.46
\$20,447.07
\$20,355.22
\$20,262.91
\$20,170.13
\$20,076.90
\$19,983.19
\$19,889.02
\$19,794.38
\$19,699.27
\$19,603.67
\$19,507.61
\$19,411.06
\$19,314.03
\$19,216.51
\$19,118.50
\$19,020.01
\$18,921.02
\$18,821.54
\$18,721.56
\$18,621.08
\$18,520.10
\$18,418.61
\$18,316.62
\$18,214.12
\$18,111.10
\$18,007.57
\$17,903.52
\$17,798.95
\$17,693.86
\$17,588.24
\$17,482.09
\$17,375.42
\$17,268.21
\$17,160.46
\$17,052.18
\$16,943.35
\$16,833.98
\$16,724.06
\$16,613.59
\$16,502.58
\$16,391.00
\$16,278.87
\$16,166.18
\$16,052.92
\$15,939.10
\$15,824.71
\$15,709.74
\$15,594.20
\$15,478.09
\$15,361.39
\$15,244.11
\$15,126.25
\$15,007.79
\$14,888.74
\$14,769.10
\$14,648.86
\$14,528.01
\$14,406.57
\$14,284.51
\$14,161.85
\$14,038.57
\$13,914.68
\$13,790.16
\$13,665.03
\$13,539.26
\$13,412.87
\$13,285.85
\$13,158.19
\$13,029.90
\$12,900.96
\$12,771.38
\$12,641.15
\$12,510.27
\$12,378.73
\$12,246.54
\$12,113.68
\$11,980.16
\$11,845.98
\$11,711.12
\$11,575.59
\$11,439.38
\$11,302.49
\$11,164.91
\$11,026.65
\$10,887.70
\$10,748.05
\$10,607.70
\$10,466.65
\$10,324.90
\$10,182.44
\$10,039.26
\$9,895.37
\$9,750.76
\$9,605.43
\$9,459.37
\$9,312.58
\$9,165.05
\$9,016.79
\$8,867.79
\$8,718.04
\$8,567.54
\$8,416.29
\$8,264.29
\$8,111.52
\$7,957.99
\$7,803.70
\$7,648.63
\$7,492.78
\$7,336.16
\$7,178.76
\$7,020.56
\$6,861.58
\$6,701.80
\$6,541.22
\$6,379.84
\$6,217.65
\$6,054.65
\$5,890.84
\$5,726.21
\$5,560.75
\$5,394.47
\$5,227.35
\$5,059.40
\$4,890.61
\$4,720.98
\$4,550.50
\$4,379.16
\$4,206.97
\$4,033.92
\$3,860.00
\$3,685.21
\$3,509.55
\$3,333.01
\$3,155.59
\$2,977.28
\$2,798.08
\$2,617.98
\$2,436.99
\$2,255.08
\$2,072.27
\$1,888.55
\$1,703.90
\$1,518.34
\$1,331.84
\$1,144.41
\$956.05
\$766.74
\$576.49
\$385.28
\$193.12
(\$0.00)
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Bond Valuation
Rate
Periods
How Often
Payment
FV
PV
Rate
Periods
How Often
Payment
FV
PV
PV
15.00%
20
1
\$1,000.00
\$61.10
PV
9.00%
8
1
\$1,000.00
\$501.87
Bond
Rate
Periods
How Often
Payment
FV
PV
PVBond
12.00%
15
2
\$80
\$1,000
\$724.70
Bond
Rate
Periods
How Often
Payment
FV
PV
PVBond
14.00%
0.5
2
\$90
\$1,000
\$976.64
Bond
PVBond
PVA
15.00%
20
1
\$70.00
\$438.15
PVA
9.00%
8
1
\$70.00
Total
\$499.25
Total
\$387.44
\$889.30
PVBond
6.00%
15
2
\$70
\$1,000
\$1,098.00
PVBond
7.00%
15
1
\$80
\$1,000
\$655.88
PVBond
Rate
Periods
How Often
Payment
FV
PV
9.00%
12
1
\$70
\$1,000
\$856.79
9.00%
20
1
\$100
\$1,000
\$1,091.29
Bond
Rate
Periods
How Often
Payment
FV
PV
PVBond
11.00%
12
1
\$100
\$1,000
\$935.08
PVBond
11.00%
12
1
\$120
\$1,000
\$1,064.92
Bond
Rate
Periods
How Often
Payment
FV
PV
PVBond
9.40%
10.5
1
\$86
\$1,000
\$945.75
Bond
Rate
Periods
How Often
Payment
FV
PV
PVBond
15.00%
20
1
\$70
\$1,000
\$499.25
Bond
Rate
Periods
How Often
Payment
FV
PV
PVBond
9.00%
8
1
\$70
\$1,000
\$889.30
Stock Valuation – 4 Methods
Common Stock Uneven Dividends
Rate
Periods
How Often
Payment
FV
PV
DCF or Supernormal Growth
PV
8.00%
1
1
PV
8.00%
2
1
\$3.50
\$3.24
\$3.65
\$3.13
PV
8.00%
3
1
\$43.35
\$34.41
Stock Value
\$40.78
Common Stock Preferred Stock/Even Dividend
C
\$3.50
r
8.5%
Perpetuity
\$41.18
P0=D0(1+g)/(R-g)
Dividend Growth Model
Given Present Div
D0
g
R
P0=D1/(R-g)
\$3.50
4.0%
12.0% my conrtol
P0 – D0
\$45.50
GLW
EBIT
Depr& Amort
EBITA 2018 Fcst
Electronics Multiple
EBITA Amount
Shares outstanding
Share Price Est
2018
1598
1351
2949
10.46
30846.54
858
35.95 \$
Given Future Div
D1
g
R
P0 – D1
\$3.64
4.0%
12.0%
\$45.50
Multiples Approach
\$
2017
1630
1158 BS
2788
10.46 Elecetronics (general)(Multiple sheet)
29162.48
858
33.99
Practice Problem 1
Rate
Periods
How Often
Payment
FV
PV
Practice Problem 2
C
r
Perpetuity
PV
12.00%
1
1
PV
12.00%
2
1
PV
12.00%
3
1
\$1.75
\$1.56
\$1.90
\$1.51
\$72.00
\$51.25
Stock Value
\$54.33
\$6.80
8.0%
\$85.00
Practice Problem 3 P0=D0(1+g)/(R-g)
Given Present Div
D0
\$1.95
g
5.0%
R
14.0% my conrtol
P0=D1/(R-g)
Given Future Div
D1
\$2.05
g
5.0%
R
14.0%
P0 – D0
P0 – D1
\$22.75
\$22.75
Practice Problem 4 P0=D0(1+g)/(R-g)
Given Present Div
D0
\$3.65
g
5.5%
R
14.0% my conrtol
P0=D1/(R-g)
Given Future Div
D1
\$3.85
g
5.5%
R
14.0%
P0 – D0
\$45.30
P0 – D1
Practice Problem 5
Rate
Periods
How Often
Payment
FV
PV
PV
14.00%
1
1
PV
14.00%
2
1
PV
14.00%
3
1
\$1.94
\$1.70
\$2.00
\$1.54
\$2.12
\$1.43
\$45.30
\$4.66
Practice Problem 6
Rate
Periods
How Often
Payment
FV
PV
PV
13.00%
1
1
PV
13.00%
2
1
PV
13.00%
3
1
PV
13.00%
4
1
\$10.00
\$8.85
\$14.00
\$10.96
\$18.00
\$12.47
\$22.00
\$13.49
or Supernormal Growth
Constant Dividend
Constant Growth
SJM
EBIT
1036
Depr& Amort
413
EBITA 2018 Fcst
1449
Electronics Multiple
11.69
EBITA Amount
16938.81
Shares outstanding
858
Share Price Est \$
19.74
current share price
\$
115.30 \$
difference
\$
33.29
113.31 share price at end of 2018
D0
g
R
P0 – D0
\$2.12
7.0%
14.0%
\$32.34
Stock Value
\$37.01
Stock Value
\$45.78
Small Business Valuation or Discounted Cash Flow
Method 1 – Discounted Cash Flow
Rate of Return
Official EBIT
Less More reasonable salary
Estimated EBITDA
Less new equipment purchases
Less inventory investment
Free Cash flow
DCF
28%
Year 1
Year 2
Year 3
\$128,350
\$192,475
\$230,290
\$110,000
\$110,000
\$110,000
(\$60,000)
(\$60,000)
(\$60,000)
\$30,000
\$30,000
\$30,000
\$20,000
\$20,000
\$20,000
\$228,350
\$292,475
\$330,290
(\$160,000)
(\$65,000)
\$3,350
\$292,475
\$330,290
\$2,617
\$178,513
\$157,495
Proceeds from sale
Less debt to be paid – Last Bal Sh
Less capital gains taxes – 20%
Value of Company
Shares outstanding
Value per share
Rate of return reason?
Growth rate reason?
Method 2 – Equity Method
Assets
Liabilities
Equity
Amount
\$825,000
\$375,000
\$450,000
Method 3 – Liquidation Method
Accounts Receivable
Inventory
Fixed Assets – Net
Value
Amount
Percentage % of Amount
\$225,000
50.0%
\$112,500
\$150,000
15.0%
\$22,500
\$325,000
10.0%
\$32,500
\$167,500
Method 4 – Multiples approach
EBITDA
Idustry EBITDA multiplier
\$228,350
3.5
\$799,225
Growth Rate
Year 4
Year 5
\$150,325
\$205,050
\$110,000
\$110,000
(\$60,000)
(\$60,000)
\$30,000
\$30,000
\$20,000
\$20,000
\$250,325
\$305,050
\$250,325
\$93,253
\$305,050
\$88,781
1.8%
Terminal Value
\$17,431,428.57
\$5,073,213
\$5,593,872
(\$250,000)
(\$1,118,774.46)
\$4,225,098
Long run Annualized Returns
Private firms
Angel Investors
Venture Capitalists
12-18%
20-35%
20-50%
35-80%
Method 1 – Discounted Cash Flow
Rate of Return
13%
Year 1
Forecasted EBIT
Estimated EBITDA
Less Fcstd equipment purchases
Free Cash flow
DCF
Proceeds from sale
Shares outstanding
Value per share
Rate of return reason?
Growth rate reason?
Year 2
\$1,598
\$1,351
\$2,949
(\$1,200)
\$1,749
\$1,548
Year 3
\$1,702
\$1,439
\$3,141
(\$1,200)
\$1,941
\$1,520
\$1,804
\$1,525
\$3,329
(\$1,200)
\$2,129
\$1,475
Growth Value
1.7%
Year 4
Year 5
\$1,876
\$1,586
\$3,462
(\$1,200)
\$2,262
\$1,387
Terminal Value
\$1,941.5 …