You will assume that the average annual return of the market is 9.6% p.a.
To calculate the discount rate for Hepal’s projected free cashflows, you will use the spot yield as a basis for calculating the cost of debt.
The terminal values, except for the depreciation expense, will use the 10-year spot yield as a basis for
calculating the cost of debt.
The terminal value of the depreciation expense will use the 7-year spot yield as a basis for calculating the
cost of debt.
complete the following in the MS Excel spreadsheet
Calculate the market capitalisation, gearing ratio and the weighted average cost of capital for Darwin
Brighton.
Calculate the discount rates for Hepal’s free cashflows for each year .
Fill out the terminal values for Hepal in the DCF model. Remember that the depreciation expense will last
for five years. Treat it as an annuity with a constant discount rate.
Calculate the projected free cashflows, the present value of free cashflows and its cumulative values.
