Valuation – Constant Dividend Growth model (DGM) Exhibit 10…

Valuation – Constant Dividend Growth model (DGM) Exhibit 10 provides the stock price and dividend paid (annual) by PCP on March 31, 2015. What is the estimate of the implied cost of equity based on the average of the high and low stock prices and the annual dividends reported on March 31, 2015? Use the constant dividend growth model and assume a dividend growth rate of 4.5% per year.

Valuation – FCF Valuation Use the following information to c…

Valuation – FCF Valuation Use the following information to calculate the enterprise value of PCP in 2015. Use the FCF constant growth model. Tax rate = 39%, long term growth rate for FCF: g=2.5% per year, WACC =5%, Income from Operations (2015) = $2612 million. Use the following assumptions: FCF = (1-Tax)*(Income from Operations) + Depreciation – Capital Expenditures – Changes in Net Working Capital Since there is no information on depreciation and working capital, you can assume that Depreciation = Capital Expenditures + Changes in Net Working Capital.  Hence, FCF = (1-Tax)*(Income from Operations)

Valuation – FCF Valuation Use the following information to c…

Valuation – FCF Valuation Use the following information to calculate the enterprise value of PCP in 2015. Use the FCF non-constant growth model. Tax rate = 39%, WACC =5%, Income from Operations (2015) = $2612 million. The yearly growth rate in FCF for 2016, 2017, and 2018 is 5%, the long-term growth rate thereafter for FCF: g=2.5% per year. Use the following assumptions: FCF = (1-Tax)*(Income from Operations) + Depreciation – Capital Expenditures – Changes in Net Working Capital Here is additional information to calculate the FCF of PCP in 2015: Depreciation = $325 million Capital Expenditures = $457 million Net Working Capital changed from $3,899 million to $3,145 million, a decrease of $754 million.

Warren Buffet has one of the best investment records in hist…

Warren Buffet has one of the best investment records in history with a compound annual return (also known as Geometric Average, GA, Annual return) of Berkshire Hathaway stock (BRK) of 22.8% per year from 1974 to 2015 compared to 8.50% per year for a portfolio of large firms (LSTK)). Based on the above returns, what would be the value in 2015 for an investment of $1000 in 1974 for BRK and for LSTK? Assume that the investment is made on January 1, 1974 and the values are for January 1, 2015. (See Exhibits 3 & 5) – (BRK/LSTK)