# Valuation Quiz Essay

Words: 1392
Pages: 6

Question 1

Palm & Sun's (PS) free cash flows are expected to be \$200 million next year and \$488 million two years from now. After that, free cash flows are expected to grow at a constant rate of 3% per year forever. P&S’s WACC is 11%, its cost of equity is 14% and its cost of debt is 9.5%. They have \$400 million of debt and \$78 million in cash on their balance sheet. Use the discounted cash flow model to find P&S’s current equity value (rounded to the nearest million dollars).

5676 margin of error +/- 2 Question 2

Swamp & Sand Industries has the following data. The discount rate is 12%. Terminal value is 3 times FCF. Cash and debt are constant. Calculate its Enterprise
The discount rate is 12%. Terminal value is 3 times FCF. Cash and debt are constant. Calculate its Equity Value. | 20X1 | 20X2 | 20X3 | Free Cash Flow | 1040 | 1040 | 1040 | Cash | 112 | 112 | 112 | Debt | 298 | 298 | 298 |

4528.3 margin of error +/- 1
Free Cash Flow and terminal value are discounted at 12% to get enterprise value. Enterprise Value -Debt -Cash =Equity Value Note: To conform with the class notes, we do subtract cash. Question 9

Swamp & Sand Industries has the following data. The interest rate is 5%, and the unlevered cost of equity is 12%. There are no terminal values, the firm sinks into bankruptcy. Calculate its Adjusted Present Value (APV). | 20X1 | 20X2 | 20X3 | FCF | 115 | 115 | 115 | Interest Expense | 27 | 27 | 27 | You Answered