• Develop a 1 page summary note sheet ( 1⁄2 page of concepts and1⁄2 page of equations) for the following topics based upon the examstudy guide concepts:

  o Chp 3: DuPont Identity, External Funds Forecasting &Sustainable growtho Chp 9 & 13: Stock and Firm Valuation
  o Chp 13: Cost of Capital – revise as needed to suit your ownlearning.

• Develop a 1 page summary of the three note sheets you’vedeveloped.

  For an abbreviated example of the structure of the topicsummaries, see the example for COC in the announcement area. Notethat it is not necessarily complete. You will need to adapt asnecessary. For example, you may choose to identify specific HWproblems that help you remember the concepts.

  Once you create the three 1 page summaries, the next step is totranslate these into a 1 page summary of all three. This final 1page summary is what you may bring into Exam 2.

  Part 2 (3 pts)

  PixNet expects sales revenues of $145 million in the next year(T1). The WACC is 8%. Operating expenses, not includingdepreciation, are estimated at 77% of sales while depreciationaverages 7% of sales. These relationships are expected to holdindefinitely.
  The CFO has noted that PixNet plans on immediately investing $11million in expanding overseas and will require additional workingcapital of $7 million to support sales the new sales growth. Bothinvestments are expected to occur immediately. Because PixNetbelieves it mature, it expects its free cash flow to the firm togrow at a constant 4% rate in perpetuity. PixNet has a tax rate of35%. PixNet currently holds $11.75 million of non- operatingmarketable securities in excess of its normal operating needs. Itslong term debt is $25 million. PixNet has 50,000 shares of stockoutstanding. PixNet has never paid a dividend and does not expectto pay one in the future.

  Questions:

  • Estimate the total firm value of PixNet. Show all steps.

  • Estimate the value per share of PixNet’s stock. Show allsteps.

  • Make assumptions as needed to answer the question and getpoints. If you do so, write them

    down and why you made them.
    You may set this up in Excel and print out your solution to handin.