In analyzing Company’s X finances, I compare their Earnings before interest, taxes, depreciation and amortization (EBITDA) to Target’s. As of 2016, Target’s EBITDA is $7.39B. Company’s X EBITDA is 10% of our company, which would put them at $739M. The price of Company X will be 8 times the amount of its EBITDA which is $5.840B. In calculating the Net present value of the company, I use the discount rate, the annual cash flow, and the initial investment to determine the NPV is negative, which tells me the amount of cash that is inflowing into the company is less than the cash that is flowing out of the company.
I also consider the Weighted Average Cost of Capital (WACC). The WACC is the average of the minimum after-tax required rate of the return which a company must earn for all its shareholders. The WACC of 10% is given, this means we will need to pay the shareholders 0.010% of every dollar earned. Therefore, I calculate the after-tax rate of $ $206,920,000 by 10% which gives $20,692,000. The tax cash flow is 100% equity (no debt); therefore, this would-be risker than the company having debt. Equity is normally held in stock appreciation and that appreciation grows as the company’s revenue, profit, and cash flow grows. Shareholders will
…show more content…
The current CBOE 10 Year Treasury Note Yield Index is 23.17%. The current state of the stock market shows the Dow Jones closing in the positive range with a 0.96% increase over a 5-day period, the NASDAQ also closed in the positive range with a 0.12% increase over a 5-day period; and the S&P closed in the positive rang with a 0.69% increase over a 5-day period. When determining if stock prices are high or low you will look at the 52-week trading prices. On the NASDAQ there were 66 highs and 27 lows during the 52-week period. This tells investors the current stock or future stock