- At the beginning of 2011, Macklemore Corporation is considering the acquisition of Blue Sky Learning (BSL), based on BSL’s actual financial data for 2010 and its projections for 2011 to 2015, as shown above Macklemore’s WACC is 8.0%, BSL’s WACC is 11.5%, and the average of the two companies’ WACCs, weighted by sales, is 8.2%. What is the present value of BSL’s free cash flow (in $ millions) for the years 2011 to 2015?Multiple Choice
- −$1.29
- $628.79
- $720.58
- $726.68
- $743.94
- None of the options are correct.
2. At the beginning of 2011, Macklemore Corporation is considering the acquisition of Blue Sky Learning (BSL), based on BSL’s actual financial data for 2010 and its projections for 2011 to 2015, as shown above. Macklemore’s WACC is 8.0%, BSL’s WACC is 11.5%, and the average of the two companies’ WACCs, weighted by sales, is 8.2%. What is the firm value of BSL (in $ millions) at the beginning of 2011, assuming it is worth the book value of its assets at the end of 2015?Multiple Choice
None of the options are correct.
$628.24
$3,669.01
$4,297.80
$4,412.94
$4,984.28
$6,951.24
3. At the beginning of 2011, Macklemore Corporation is considering the acquisition of Blue Sky Learning (BSL), based on BSL’s actual financial data for 2010 and its projections for 2011 to 2015, as shown above. Macklemore’s WACC is 8.0%, BSL’s WACC is 11.5%, and the average of the two companies’ WACCs, weighted by sales, is 8.2%. What is the value of BSL’s equity (in $ millions) at the beginning of 2011, assuming it is worth the book value of its assets at the end of 2015?Multiple Choice
None of the options are correct.
$1,702.80
$2,227.80
$2,342.94
$2,383.94
$2,603.80
$4,297.80
4. At the beginning of 2011, Macklemore Corporation is considering the acquisition of Blue Sky Learning (BSL), based on BSL’s actual financial data for 2010 and its projections for 2011 to 2015, as shown above. Macklemore’s WACC is 8.0%, BSL’s WACC is 11.5%, and the average of the two companies’ WACCs, weighted by sales, is 8.2%. What is the firm value of BSL (in $ millions) at the beginning of 2011, assuming the company’s free cash flow grows 4% per year in perpetuity after 2015?Multiple Choice
None of the options are correct.
$4,297.25
$4,571.49
$4,686.78
$6,181.49
$5,351.19
$7,423.16
5. At the beginning of 2011, Macklemore Corporation is considering the acquisition of Blue Sky Learning (BSL), based on BSL’s actual financial data for 2010 and its projections for 2011 to 2015, as shown above. Macklemore’s WACC is 8.0%, BSL’s WACC is 11.5%, and the average of the two companies’ WACCs, weighted by sales, is 8.2%. What is the value of BSL’s equity (in $ millions) at the beginning of 2011, assuming the company’s free cash flow grows 4% per year in perpetuity after 2015?Multiple Choice
- $1,976.49
- $2,501.49
- $2,877.49
- $4,195.49
- $4,571.49
- None of the options are correct.
6. At the beginning of 2011, Macklemore Corporation is considering the acquisition of Blue Sky Learning (BSL), based on BSL’s actual financial data for 2010 and its projections for 2011 to 2015, as shown above. Macklemore’s WACC is 8.0%, BSL’s WACC is 11.5%, and the average of the two companies’ WACCs, weighted by sales, is 8.2%. What is the firm value of BSL (in $ millions) at the beginning of 2011, assuming that at year-end 2015, the company’s equity is worth 15 times earnings after tax and its debt is worth book value.Multiple Choice
None of the options are correct.
$628.24
$3,669.01
$6,343.81
$6,755.83
$7,008.06
$7,429.74
7. At the beginning of 2011, Macklemore Corporation is considering the acquisition of Blue Sky Learning (BSL), based on BSL’s actual financial data for 2010 and its projections for 2011 to 2015, as shown above. Macklemore’s WACC is 8.0%, BSL’s WACC is 11.5%, and the average of the two companies’ WACCs, weighted by sales, is 8.2%. What is the value of BSL’s equity (in $ millions) at the beginning of 2011, assuming that at year-end 2015, the company’s equity is worth 15 times earnings after tax and its debt is worth book value.Multiple Choice
None of the options are correct.
$3,484.68
$4,723.81
$4,938.06
$5,554.68
$6,343.81
8. A recent annual income statement for Stonehenge Roofing is shown below.
| Net sales | $ 5,000 |
|---|---|
| Cost of sales | 3,200 |
| Gross profit | 1,800 |
| Operating expense | 800 |
| Depreciation expense | 200 |
| Operating income | 800 |
| Interest expense | 100 |
| Income before tax | 700 |
| Tax | 175 |
| Income after tax | $ 525 |
Assume that during the year, Stonehenge spent $180 on new capital equipment and increased current assets net of non-interest-bearing current liabilities by $150. What was Stonehenge’s free cash flow in this year?Multiple Choice
- $270
- $395
- $470
- $545
- $650
- None of the options are correct.
9. STU Corporation has $3 million in earnings on $20 million in sales and has 1 million shares outstanding. Earnings per share of comparable firm 1 is $5, and earnings per share of comparable firm 2 is $2. Comparable firm 1’s stock is trading for $50, and comparable firm 2’s stock is trading for $28. What is the estimated stock price of STU using the method of comparables? (Use average multiples of the comparable firms when doing the calculations.)Multiple Choice
$40.00
$33.43
$36.00
$39.00
10. Tutter Corporation is being valued using discounted cash flow methodology with terminal value calculated as a growing perpetuity. Not including the terminal value, the present value of projected free cash flows for years 1 through 5 is $200 million (total). In year 5, projections show free cash flow of $60 million. What is the estimated fair market value of Tutter Corporation? Assume a WACC of 10% and a growth rate of 2%.Multiple Choice
$965 million
$666 million
$675 million
$950 million
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