I have a project coming up that I need help with.
Here are the general requirements:
Time Value of Money
A.Calculate the following time value of money figures:
1.Calculate the present value of the company based on the given interest rate and expected revenues over time.
2. Suppose the risk of the company changes based on an internal event. Recalculate the present value of the company.
3.Suppose that a potential buyer has offered to buy this company in five years. Based on the present value you calculated above, what wouldbe a reasonable amount for which the company should be sold at that future time?
B.What are theimplicationsof the change in present value based on risk? In other words, what does the change mean tothe company, and how wouldyou,as a financial manager,interpret it? Be sure to justify your reasoning.
C.Based on the future value of the company that you calculated,andbeing mindful of the need to effectively balance portfolio risk with return, whatrecommendation would you make about purchasing the company as an investment at that price? Be sure to substantiate your reasoning.
The spreadsheet template:
Interest Rate 8%, and at 5% and 12% FCF1 FCF2 FCF3 FCF4 FCF5 Amounts $ 113,000,000
$ 111,000,000
$ 108,000,000
$ 101,000,000
$ 97,000,000
Pv $0.00 $0.00 $0.00 $0.00 $0.00 Total Pv $0.00
Here are the particulars:
THE HOME DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
amounts in millions, except share and per share data
February 1,
2015
February 2,
2014
ASSETS
Current Assets:
Cash and Cash Equivalents
$
1,723
$
1,929
Receivables, net
1,484
1,398
Merchandise Inventories
11,079
11,057
Other Current Assets
1,016
895
Total Current Assets
15,302
15,279
Property and Equipment, at cost
38,513
39,064
Less Accumulated Depreciation and Amortization
15,793
15,716
Net Property and Equipment
22,720
23,348
Goodwill
1,353
1,289
Other Assets
571
602
Total Assets
$
39,946
$
40,518
LIABILITIES AND STOCKHOLDERSâ EQUITY
Current Liabilities:
Short-Term Debt
$
290
$
â
Accounts Payable
5,807
5,797
Accrued Salaries and Related Expenses
1,391
1,428
Sales Taxes Payable
434
396
Deferred Revenue
1,468
1,337
Income Taxes Payable
35
12
Current Installments of Long-Term Debt
38
33
Other Accrued Expenses
1,806
1,746
Total Current Liabilities
11,269
10,749
Long-Term Debt, excluding current installments
16,869
14,691
Other Long-Term Liabilities
1,844
2,042
Deferred Income Taxes
642
514
Total Liabilities
30,624
27,996
I have a project coming up that I need help with.
Here are the general requirements:
Time Value of Money
A.Calculate the following time value of money figures:
1.Calculate the present value of the company based on the given interest rate and expected revenues over time.
2. Suppose the risk of the company changes based on an internal event. Recalculate the present value of the company.
3.Suppose that a potential buyer has offered to buy this company in five years. Based on the present value you calculated above, what wouldbe a reasonable amount for which the company should be sold at that future time?
B.What are theimplicationsof the change in present value based on risk? In other words, what does the change mean tothe company, and how wouldyou,as a financial manager,interpret it? Be sure to justify your reasoning.
C.Based on the future value of the company that you calculated,andbeing mindful of the need to effectively balance portfolio risk with return, whatrecommendation would you make about purchasing the company as an investment at that price? Be sure to substantiate your reasoning.
The spreadsheet template:
Interest Rate 8%, and at 5% and 12% | |||||||||||
FCF1 | FCF2 | FCF3 | FCF4 | FCF5 | |||||||
Amounts |
|
|
|
|
| ||||||
Pv | $0.00 | $0.00 | $0.00 | $0.00 | $0.00 | ||||||
Total Pv | $0.00 |
Here are the particulars:
THE HOME DEPOT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
amounts in millions, except share and per share data | February 1, | February 2, | |||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and Cash Equivalents | $ | 1,723 | $ | 1,929 | |||
Receivables, net | 1,484 | 1,398 | |||||
Merchandise Inventories | 11,079 | 11,057 | |||||
Other Current Assets | 1,016 | 895 | |||||
Total Current Assets | 15,302 | 15,279 | |||||
Property and Equipment, at cost | 38,513 | 39,064 | |||||
Less Accumulated Depreciation and Amortization | 15,793 | 15,716 | |||||
Net Property and Equipment | 22,720 | 23,348 | |||||
Goodwill | 1,353 | 1,289 | |||||
Other Assets | 571 | 602 | |||||
Total Assets | $ | 39,946 | $ | 40,518 | |||
LIABILITIES AND STOCKHOLDERSâ EQUITY | |||||||
Current Liabilities: | |||||||
Short-Term Debt | $ | 290 | $ | â | |||
Accounts Payable | 5,807 | 5,797 | |||||
Accrued Salaries and Related Expenses | 1,391 | 1,428 | |||||
Sales Taxes Payable | 434 | 396 | |||||
Deferred Revenue | 1,468 | 1,337 | |||||
Income Taxes Payable | 35 | 12 | |||||
Current Installments of Long-Term Debt | 38 | 33 | |||||
Other Accrued Expenses | 1,806 | 1,746 | |||||
Total Current Liabilities | 11,269 | 10,749 | |||||
Long-Term Debt, excluding current installments | 16,869 | 14,691 | |||||
Other Long-Term Liabilities | 1,844 | 2,042 | |||||
Deferred Income Taxes | 642 | 514 | |||||
Total Liabilities | 30,624 | 27,996 |