# Case Study Corporate Finance Food Industry

Topics: Investment, Stock market, Risk Pages: 10 (3202 words) Published: September 30, 2011
CASE STUDY HOMEWORK CORPORATE FINANCE

PROFESSOR: G. BERTINETTI

STUDENT Albert Maurer

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Considerations: We downloaded most of the data from the "stern1" website. The Financial Forecast data was given to us by our professor. In the forecast "EBITDA" was twice times mentioned, we assumed for our further calculations that the first "EBITDA" is the "EBIT" Furthermore with the "EBIT", we calculated the depreciation. However, for our DCF (Discounted Cash Flow) Valuation, the data of the year 2010 is not necessary. With reference to our BBB rated American bond, we discounted it, on an assumption that the valuation was done by February 2011. In particular we thought about starting from the first quarter of the year, which leads to a value of 0.75 of maturity for our first discounted Cash-flow. The remaining ones could be taken from the calculation table at the end of this report. The present value, is the value of a private company, it is calculated by discounting the cashflows. The discounted rate reflects the risk in a firm and the debt. The company itself wants to sell 30% of their shares to a private equity investor. Present Value calculation:

WACC (Weighted Cost of Average) Before we are able to calculate the fair value of the firm, we have to consider several components. For calculating the WACC, we have to consider three main components: a) cost of equity, b) cost of debt and c) capital structure. Cost of Capital: It is sometimes called, in an economic context, discount rate. The cost of capital is a market driven number. That is the reason why we use market value weights. In particular it is the expected rate of return that the market requires in order to attract funds to an investment. It is often called as opportunity costs. Being more precise it means that an investor will not invest in a particular asset if there is a more attractive substitute. Cost of Capital = Cost of Equity (E/(D+E)) + After-tax Cost of Debt (D/(D+E)) Cost of Debt: It is the cost of debt financing to company, when the company takes out a loan or issues a bond. It depends on risk factors. It is calculated by: 1

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Cost of debt=Risk free...