Fojtasek financing problem is very common to many other family companies. Family members are not interested in the family business, they would rather liquidate their equity and use it to do something else.
Don't use plagiarized sources. Get Your Custom Essay on
Fojtasek financial report
just from $13,9 / page
Fair market value of the firm: Rm: Prime rate = 9% rf: risk free rate = 7.2% Average Unleveraged beta bu = = .839 Assume that growth rate : g = 2%, RPm = 4% , tax rate is 35% Unlevered cost of equity rsu = rf + RPm (bu) = 7.2% + 4%(.839) = 10.56% Operating cash flow using base case projections:
19951996199719981999 Cash Flow7,7729,2339,80710,29210,513 Interest Expenses3,5873,0422,3241,507599 Interest * Tax rate1255.451064.7813.4527.45209.65 TV1999 = 10513 + (10513*1.02)/(10.56%-2% ) = $135.81 Million Vunlevered = Net present value of future operating cash flow = $ 110.9 million. The firm cost of debt: Rd = 9% + 1.5% = 10.5% V taxshield= Net present value of interest tax savings = $3 million Fair market value of the firm = 110.9+ 3 = $113.9 M Operating cash flow using management case projections: This case yields very high growth rate. Assume growth rate is 6% 19951996199719981999 Cash Flow7353922410,72412,30813,736 Interest Exp.3,6103,0912,3291,349226 Interest * Tax Rate1263.51081.85815.15472.1579.1 TV1999 = 13736 + (13736*1.06)/(10.56%-6% ) = 333,037 Vunlevered = Net present value of future operating cash flow = $ 232 million
Remember. This is just a sample.
You can get your custom paper from our expert writers
Cite this page
Fojtasek financial report. (2018, May 09). Retrieved from https://phdessay.com/each-and-every-one-of-us-faces-personal-trials-that-trigger-difficult-to-manage-emotions-that-affect-our-communication-relationships-and-the-quality-of-our-lives-we-refer-to-them-as-emotion-challen/