(Solved) BX 3032 Advanced Business Modelling/ BX 3032 Quiz 2.

BX 3032 Quiz 2. What cash flow models for valuation have you incorporated into your project for the value of the firm and/or the value of equity? Of the discounted-cash-flow methods which you think is likely to be the best and why? 3. Explain how you estimated your forecasted values for the discounted cash flow model and the dividend model in your project. 4. How did you estimate the terminal value for the discounted cash flow model and how did this value contribute to the overall present value of cash flows? That, is what percentage was the present value of the terminal value relative to the total value of cash flows? How important is this value to your valuation story? Relate your answer to your group project. 5. Adam Forbis is evaluating Twinkle Inc. by using the FCFF and FCFE valuation approaches. Adam has collected the following information (in AUD): • Twinkle Inc. has net income of $450 million, depreciation of $100 million, capital expenditures of $200 million, and an increase in working capital of $50 million. • Twinkle Inc. will finance 35% of the increase in net fixed assets (capital expenditures less depreciation) and 40% of the increase in working capital with debt financing. • Interest expenses are $200 million. The current market value of Twinkle outstanding debt is $2,000 million. • FCFF is expected to grow at 5% percent indefinitely, and FCFE is expected to grow at 8% indefinitely. • Tax rate is 30%. • Twinkle Inc. is financed with 40% debt and 60% equity. The before- tax cost of debt is 9%, and the before-tax cost of equity is 14%. • Twinkle Inc. has 10 million outstanding shares. a) Using the FCFF valuation approach, estimate the total value of the firm, the total market value of equity, and the per-share value of equity. b) Using the FCFE valuation approach, estimate the total market value of equity and the per-share value of equity. 6. What is Ohlson’s valuation model? You must define each parameter. Under what circumstances do we need to adjust Ohlson's model (i.e. core vs. non-core)? How are the notions of