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    Inputs: Before Restructuring After Restructuring

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    api-3763138
    The document provides inputs and outputs for valuing a firm before and after restructuring. It includes financial details like EBIT, capital invested, tax rates, growth rates, and discount rates. The output shows that restructuring increased the firm's value from $150,444 to $206,773, a change of $56,329 or 37.44% of the original firm value.

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    Download as XLS, PDF, TXT or read online from Scribd

    Inputs: Before Restructuring After Restructuring

    Uploaded by

    api-3763138
    23 views4 pages
    The document provides inputs and outputs for valuing a firm before and after restructuring. It includes financial details like EBIT, capital invested, tax rates, growth rates, and discount rates. The output shows that restructuring increased the firm's value from $150,444 to $206,773, a change of $56,329 or 37.44% of the original firm value.

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    valenh

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    The document provides inputs and outputs for valuing a firm before and after restructuring. It includes financial details like EBIT, capital invested, tax rates, growth rates, and discount rates. The output shows that restructuring increased the firm's value from $150,444 to $206,773, a change of $56,329 or 37.44% of the original firm value.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    23 views4 pages

    Inputs: Before Restructuring After Restructuring

    Uploaded by

    api-3763138
    The document provides inputs and outputs for valuing a firm before and after restructuring. It includes financial details like EBIT, capital invested, tax rates, growth rates, and discount rates. The output shows that restructuring increased the firm's value from $150,444 to $206,773, a change of $56,329 or 37.44% of the original firm value.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLS, PDF, TXT or read online from Scribd
    Download as xls, pdf, or txt
    of 4

    Firm Value Multiples

    Inputs
    Before restructuring After restructuring
    EBIT from existing assets = $7,088 $7,088
    Capital Invested in existing assets = $14,967 $14,967
    Tax rate = 35% 35%
    Return on Capital on new investments = 25.15% 24%
    Reinvestment Rate = 32.21% 40%
    Length of growth period = 5 5
    Debt Ratio = 1.70% 20%
    Cost of Equity in high growth = 8.42% 9.68%
    Pre-tax Cost of Debt in high growth = 5.85% 6.65%
    Stable Growth Rate = 5.00% 5.00%
    Return on capital in stable growth = 15.00% 15.00%
    Cost of Equity in stable growth = 8.61% 8.61%
    Cost of debt in stable growth = 5.85% 5.85%

    Output
    Current EBIT = $7,088.00 $7,088.00
    Current Tax Rate = 35.00% 35.00%
    Capital Invested (Book Value) = $14,967.00 $14,967.00
    High Growth Period
    Length of high-growth period (n) = 5 5
    Reinvestment Rate (as % of EBIT(1-t)) = 32% 40%
    Growth rate during period (g) = 8.10% 9.60%
    Cost of Equity during period = 8.42% 9.68%
    After-tax Cost of Debt = 3.80% 4.32%
    Debt Ratio (D / (D + E)) = 1.70% 20.00%
    Stable Growth Period
    Growth rate in steady state = 5.00% 5.00%
    Reinvestment Rate in Stable growth = 33.33% 33.33%
    Cost of Equity in steady state = 8.61% 8.61%
    After-tax Cost of Debt = 3.80% 3.80%

    Page 1
    Firm Value Multiples

    Debt Ratio (D / (D + E)) = 1.70% 20.00%


    Output
    Value of Firm = $150,444.68 $206,773.54
    Change in Value = $56,328.86
    As percent of firm value = 37.44%

    Page 2
    Firm Value Multiples

    Remarks
    ! Operating efficiencies and cost cutting
    ! Divest useless assets
    ! Lower tax burden
    ! Better investments
    ! Change your reinvestment policy - internal and external (acquisitions)
    ! Build up competitive advantages
    ! Move to an optimal debt ratio
    ! Reduce your operating leverage/make your product more discretionary. Change to reflect new debt ratio.
    ! Match up your debt to your assets. Change your cost to reflect new debt ratio
    ! Cannot be higher than the growth rate of the economy
    ! Change with caution. This is your firm's return on capital forever.
    ! Change with caution. This is your firm's cost of equity forever.
    ! Change with caution. This is your firm's cost of debt forever.

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    Page 3
    Firm Value Multiples

    (in percent)

    Page 4

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