Chapter_7收购、兼并和重组课后题目.ppt

* * * * * * * * * Choosing the Correct Tax Rate(Marginal or Effective) Effective rates are those a firm is actually paying after allowable deductions (e.g., investment tax credits) and deferrals (e.g., accelerated depreciation) Marginal tax rates are those paid on the last dollar of income earned Zero and Constant Growth Models: In calculating valuation cash flows, use marginal tax rates1 Variable Growth Model: In calculating valuation cash flows, Use effective rates to calculate annual cash flows when effective rates are less than marginal rates and Use marginal rates in calculating terminal period cash flows.1 1The use of effective tax rates during the terminal or an indefinite growth period implies the firm will defer the payment of taxes indefinitely. Practice Exercise Free cash flow to equity last year was $4 million. It grew by 20% in the current year; it is expected to grow at a 15% rate annually for the next five years, and then assume a more normal 4% growth rate thereafter. The firm’s cost of equity is 10% during the high growth period and then drops to 8% during the normal growth period. What is the present value of the firm to equity investors (equity value)? If the market value of the firm’s debt is $10 million, what is the present value of the firm (enterprise value)? Adjusting Firm Value Generally, the value of the firm’s equity is the sum of the present value of the firm’s operating assets and liabilities plus terminal value (i.e., enterprise value) less market value of firm’s long-term debt. However, value may be under or overstated if not adjusted for present value of non-operating assets and liabilities assumed by the acquirer. PVFCFE = PVFCFF (incl. terminal value) – PVD + PVNOA – PVNOL where PVFCFE = PV of free cash flow to equity investors PVFCFF = PV of free cash flow to the firm (i.e., enterprise value) PVD = PV of debt PVNOA