Laughlin’s Locks (LLL), Inc. has the following financial estimates.  Calculate the free cashflow for LLL.   ($ in millions) Sales                                                                                   $920 Depreciation & Amortization % of sales                            5% EBITDA Margin                                                                  15% Increase/(decrease) in Net Working Capital                    13 Capital Expenditures % of sales                                        2.5% Tax Rate                                                                               25%  

Laughlin’s Locks (LLL), Inc. has the following financial estimates.  Calculate the free cashflow for LLL.   ($ in millions) Sales                                                                                   $920 Depreciation & Amortization % of sales                           4% EBITDA Margin                                                                  15% Increase/(decrease) in Net Working Capital                     12 Capital Expenditures % of sales                                        2.5% Tax Rate                                                                               25%  

SappySYDsworld, Inc. has a $10 million (face value), 10-year bond issue selling for 99 percent of par that pays an annual coupon of 8 percent. What would be SappySYDsworld’s before-tax component cost of debt?

Calculate the unlevered beta for the target company.  The company has a levered beta is 1.35, the debt-to-equity ratio is 38%, and the marginal tax rate is 21%.  

Calculate the levered beta for the target company.  The target company has an unlevered beta of 1.1, a debt-to-equity ratio of 47% and a marginal tax rate of 21%.  

When determining a terminal value for DCF analysis, there are two methodologies discussed in the chapter: EMM and PGM. Which requires a steady state at the end of the projection period?  

If the company increases their inventory, this is a _________ of cash. If the company decreases their accounts payable, this is a ____________ of cash.

Calculating the free cash flow for the target company can be challenging.  Which of the following is not a key driver of the target company’s projected free cash flow?  

Using the Capital Asset Pricing model to estimate the cost of equity will require an estimate of the risk-free rate. Which of the following is an acceptable proxy for the risk-free rate?  

Beta is a measure of risk. To calculate beta, calculate the covariance between ___________ and ___________.