The beta for Hipersierra is 1,5. The return of the risk free asset is 4%, and the ed market return for the equity markets is currently estimated at 9,5%. Hipersierra Inc. Estimated that, under current market conditions, and given its ss risk, the cost of its debt would be 11%. Its current Net Debt amounts to 30 euros. The market Price of Hipersierra shares is 19 euros, and there are 5 million ding shares. For 2015 Al... 11 nad xroatmoonta both for Eixed aggota

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question

Please explain proper steps by Step and Do Not Give Solution In Image Format ? And Fast Answering Please ?

The beta for Hipersierra is 1,5. The return of the risk free asset is 4%, and the
expected market return for the equity markets is currently estimated at 9,5%.
Hipersierra Inc. Estimated that, under current market conditions, and given its
business risk, the cost of its debt would be 11%. Its current Net Debt amounts to 30
million euros. The market Price of Hipersierra shares is 19 euros, and there are 5 million
outstanding shares.
For 2015, there are 14 mn euros of planned investments, both for Fixed assets
(Capex) and Net Working Capital combined. After that, the investment plan would
produce the forecasted Balance Sheets mentioned above.
1. Find out the Market Value of the Equity of Hipersierra using a DCF approach.
For the Terminal Value use the perpetuity model. Please mention (there is no
need to explain) the steps of the DCF model as you calculate it.
Transcribed Image Text:The beta for Hipersierra is 1,5. The return of the risk free asset is 4%, and the expected market return for the equity markets is currently estimated at 9,5%. Hipersierra Inc. Estimated that, under current market conditions, and given its business risk, the cost of its debt would be 11%. Its current Net Debt amounts to 30 million euros. The market Price of Hipersierra shares is 19 euros, and there are 5 million outstanding shares. For 2015, there are 14 mn euros of planned investments, both for Fixed assets (Capex) and Net Working Capital combined. After that, the investment plan would produce the forecasted Balance Sheets mentioned above. 1. Find out the Market Value of the Equity of Hipersierra using a DCF approach. For the Terminal Value use the perpetuity model. Please mention (there is no need to explain) the steps of the DCF model as you calculate it.
Today is the 31st of December 2014, and Hipersierra Inc. presents the following
forecast of its Income Statement and Blanace Sheet for the following 5 years. After this
period, it estimates the business will grow at 3,5% per annum.
Income Statement
Sales
COGS
Gross Profit
General expenses
EBITDA
Depreciation
EBIT
Interest expense
PBT
Taxes (35%)
Net Income
To Dividends
To Retained Earnings
Balance Sheet
Gross Fixed Assets
Inventory
Accounts Receivable
Cash
Marketable Securities
TOTAL ASSETS
(mn euros)
Accumulated Depreciation
Long term Financial Investments
Common Stock
Reatined Earnings
Financial Debt I/t
(Pay-out)
(mn euros)
Financial Debt s/t
Accounts Payable
TOTAL LIABILITIES AND EQUITY
2015
185
120
65
35
30
10
20
4,6
15
5,39
10
4
2015
42
-10
4,5
15
15
3
0,5
70
22,0
12,0
20,0
4,0
12
70
2016
199
129
70
38
*
32
11
21
4,00
17
5,95
35,0%
11
5
45%
2016
6
53
-21
5,5
17
18
3
1,0
77
22,0
18,1
18,5
4,0
14
77
2017
215
140
75
41
34
11
23
2017
3,1
20
6,965
35,0%
13
6
46%
7
65
-32
5,5
19
21
4
1,0
84
21,0
25,0
17,5
4,0
16
83
2018
230
150
80
44
36
12
24
2,5
22
7,525
35,0%
14
7
50%
2018
7
77
-44
5,5
21
25
4
1,0
90
20,0
32,0
16,0
3,5
18
89
2019
247
161
86
47
39
13
26
2,2
24
8,33
35,0%
15
8
52%
2019
90
-57
5,5
23
28
5
1,0
96
20,0
39,4
13,0
3,0
20
95
Transcribed Image Text:Today is the 31st of December 2014, and Hipersierra Inc. presents the following forecast of its Income Statement and Blanace Sheet for the following 5 years. After this period, it estimates the business will grow at 3,5% per annum. Income Statement Sales COGS Gross Profit General expenses EBITDA Depreciation EBIT Interest expense PBT Taxes (35%) Net Income To Dividends To Retained Earnings Balance Sheet Gross Fixed Assets Inventory Accounts Receivable Cash Marketable Securities TOTAL ASSETS (mn euros) Accumulated Depreciation Long term Financial Investments Common Stock Reatined Earnings Financial Debt I/t (Pay-out) (mn euros) Financial Debt s/t Accounts Payable TOTAL LIABILITIES AND EQUITY 2015 185 120 65 35 30 10 20 4,6 15 5,39 10 4 2015 42 -10 4,5 15 15 3 0,5 70 22,0 12,0 20,0 4,0 12 70 2016 199 129 70 38 * 32 11 21 4,00 17 5,95 35,0% 11 5 45% 2016 6 53 -21 5,5 17 18 3 1,0 77 22,0 18,1 18,5 4,0 14 77 2017 215 140 75 41 34 11 23 2017 3,1 20 6,965 35,0% 13 6 46% 7 65 -32 5,5 19 21 4 1,0 84 21,0 25,0 17,5 4,0 16 83 2018 230 150 80 44 36 12 24 2,5 22 7,525 35,0% 14 7 50% 2018 7 77 -44 5,5 21 25 4 1,0 90 20,0 32,0 16,0 3,5 18 89 2019 247 161 86 47 39 13 26 2,2 24 8,33 35,0% 15 8 52% 2019 90 -57 5,5 23 28 5 1,0 96 20,0 39,4 13,0 3,0 20 95
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Knowledge Booster
Treasury Market
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education