MGMT 646 Study Guide - Final Guide: Preferred Stock, Net Present Value, Risk Neutral
Document Summary
Nopat = revenue cogs sga depreciation/amort. Fcf = nopat + depreciation changes in nwc capex + after tax salvage value. Unlevered free cash flow = ebitda - capex - working capital taxes. Flow to equity (fte) = net income net capex nwc + new debt debt. Nwc = inventory + accounts receivable accounts payable if using cash only to pay for investment. Otherwise: current assets current liabilities (capm): e( rp =rrf + p[ e(r m) r rf] Relevered equity beta: be = ba + (d/e)(1-tc)(ba) Unlevered beta: ba = be / (1+ ((d/e)*(1-tc)) Value of unlevered firm with cf in perpetuity: vu= Ebit (1 t c) re (re is unlevered or ra) Weighted average cost of capital with taxes: wacc= If wacc > re the company is destroying value. If wac < re the company is creating value. Beta of equity with taxes: e= a+ d. Unlevering beta: bu = bl / (1+ (1-tc)*(d/e) )
