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FCF
-11.2
2)
what is the appropriate discount rate
(Ra = Rf +beta(Expected market return - Risk free rate))
Market Risk Premium = Expected Return of the Market Risk-Free Rate
b) what is the value of the project?
NPV of cashflows
NPV with growth 8%
NPV of project
0.158
$43.56
306.61323
$320.17
* Re +
* Rd * (1 Tax ra
NPV =
$46.06
NPV with 8% 390.07388
NPV of proje $406.14
5)
How do the values from the APV, WACCF approaches compare? How
do the assumptions about financial policy differ across the three
approaches?
Provided I did the last calculation correc
the wacc approach has a lower cost but
the full equity approach is even lower in
e Statement
e Statement
t Balance Sheets: Current Assets and Liability accounts
ded - CL current financial debt excluded
t Balance Sheets: Property, Plant and Equipment accounts
2007E
2008E
Risk-free rate
Project cost of debt
Market risk premium
tax rate
As set beta for competi t
2009E
390
59
25
34
13
20
30
0
560
84
28
57
23
34
30
0
750
113
30
83
33
50
30
0
15.4
32.2
49.8
0.08
0.078
(Tax shield)
e+
* Rd * (1 Tax rate)
Re =
Wacc =
r-g =
g=
0.1796
0.1449
0.0649
0.08
Be_equity=
the last calculation correct there is more value with the WACC approach with a constant 25% debt to market ratio in pe
oach has a lower cost but subject to tax because of the debt
approach is even lower in cost.
0.05
0.068
0.072
0.4
1.5
638.46
2.0822976
306.61323
$350.17
$320.17
767.33436
1.9671514
390.07388
$436.14
$406.14
2004A
(in millions) Revenue
COGS and expenses EBITDA Depreciation
EBITDA
Depreciation
EBIT
Tax expense
Net income
30000
26600
3340
1460
1880
1000
880HKD