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I have failed in the participation part of the course but got a 7 in the written exam. In this case do I have to do the written resit on January 7th as well ( I saw it on my timetable) or I just have to finish the participation resit?
There is a much easier way to calculate this. We know that the formula for a levered firm is the following: VL = VU + PV(interest tax shield) - PV (financial distress costs). We know that VU=250 million and VL = 10,85*250 = 271,25 million. For a firm with permanent debt, PV (interest tax shield) = D*Tc = 100*0,35 = 35 million. With these data, we can then calculate PV (financial distress costs) = 250+35-271,25 = 13,75 million
Dear Anonymous Ferris Wheel,
The question is stated in a super weird way and it is very difficult to understand what exactly the want from you. So basically, put yourself in the position of the manager and now you have different scenarios which might occur. The manager will engage in the scenario with the highest benefit for him (the highest equity value). That`s why we first compare the different opportunities, then decide for the one with the highest payoff for equity holders and lastly calculate the asset value in this scenario.
Again, I personally think that this is not clear from the exercise.
Your SF-Team Martijn
Anonymous Gas Pump
1 month ago
hey, Martijn do we consider also the 20mil for the reduction of value bc of empire building ? bc the guy did not include that, could you please explain me this?:)
Actually the correct answer is 150million.
You did not include the first year, nor the growth factor over the FCFF in future years.
So if I am right it should be:
(6/1,07) + ((6 * 1,03) / (0,07-0,03)) = 160 million which is closest to 150
I don't u derstand why because an allowance budget of 11250 should have been created for 2017 based on the sales and this 10600 taken out of the allowance?
This answer would directly take the actual warranty for an allowance budget which doesn't make sense to me as you don't know the actual amount when setting up the allowance .
or is 'provision' suddenly not meant as allowance anymore while it was for the previous question and is this a direct write-off all of a sudden?
Hey so for the 1st question, I thought since the outcome of the cqsh flow is equally likely tqht you have to take it times 1/3 . And for the second question, I just took the unlevered equity cash flow minus the debt. (ex: 150 - 125 = 25 )
I hope this helped you :)
Discount on Bonds Payable is a contra-account of the Bonds Payable account. When the discount on a bond for a certain period is amortized, the balance of the Discount on Bonds Payable account decreases with the amount of the amortization. When the contra-account decreases and the Bonds Payable account remains the same, the total book value increases.
The formula used is (Interest tax shield * borrowing cost * tax on income) / borrowing cost.
The only this you need to find is the interest tax shield = amount / (borrowing cost * tax rate) = 1/(0.07*0.35) = 40.8163
Finally, you apply all numbers to the formula
= (40.4163 * 0.07* 0.15) / 0.07 = 6.1