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Question 3

Problem 2 FCFF
It is 12/31/15. The following data have been accumulated from analysis of Frank
Beamer Incorporated:
	2016E	2017E	2018E
EBIT	250,000	325,000	340,000
x (1-tax) = NOPAT	150,000	195,000	204,000
add Depreciation	90,000	100,000	110,000
less Capital Expenditures	(100,000)	(110,000)	(110,000)
+/1 Change in NWC	(25,000)	(35,000)	(40,000)
Annual FCFF	$ 115,000	$ 150,000	$ 164,000
Given:
Market Value Net Debt	$ 500,000
Book Value Net Debt	$ 600,000
Shares Outstanding	200,000
Stock Price per share	$ 15.00
Effective Tax Rate	30.0%
WACC	8.0%
Beta	1.10
Risk Free Rate	4.00%
Equity Risk Premium	6.00%
Terminal EV/EBITDA	6.00
Calculate the Equity Value per Share for Frank Beamer Incorporated
as of 12/31/15 using the Free Cash Flows to the Firm Approach.
Is the stock current over or under valued?
As you work through the problem, fill in the following numbers:
Show work for partial credit.
Frank Beamer cost of equity
Frank Beamer WACC	8%
Terminal Value in 2018 (EBITDA Multiple)
Enterprise Value
Equity Value
Equity Value per Share
Stock over or under valued?

Question 4

Problem 2 (15 points).20 minutes
The following information relates to the Capital Structure of Manny Machado Incorporated:
Market Value of Debt	$ 50,000,000
Book Value of Debt	$ 60,000,000
Book Value of Equity	$ 60,000,000
Market Value of Equity	$ 100,000,000
Coupon Rate of Debt	4.0%	pre-tax
Yield to Maturity of Debt	8.0%	pre-tax
Risk Free Rate =	4.5%
Equity Risk Premium =	5.0%
Manny Machado Beta =	1.0
Manny Machado ROE =	12.0%
Manny Machado Stock Price=	$ 13.00
Manny Machado Tax Rate =	30.0%
A. Calculate the WACC for Manny Machado Incorporated and fill in the boxes:
		Weight	Cost	WACC
	Debt=
	Equity=
	Total=

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