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Prob. 1 WACC

Component PDM GAL
Net Income (M$) 31.50 20.25
Earnings per share 3.00 1.50
# of shares (M)
Price per share 24.00 14.00
Market Value - Equity (M)
Market Value - Debt (M) 100 80
Market Value - Total (M)
- % Debt
- % Equity
Beta (levered) 1.20 1.25
Beta (unlevered)
Average Beta (unlevered)
Values for combined JTM/PAN Airways:
% Debt 50.0%
% Equity
Beta (relevered)

alfonso canella: alfonso canella: Average Beta (unlevered) / % Equity
alfonso canella: alfonso canella: Net Income / Earnings per share
alfonso canella: alfonso canella: Net Income / Earnings per share		 Risk free rate 2.0%
Market risk premium 5.5%
Expected equity return (CAPM)
Expected cost of debt 5.5%
Tax rate 21.0%
Weighed average cost of capital (WACC)

Prob. 2 Gate NPV and IRR

Start Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15
Investment (1,200,000)
Working Capital (1,200,000)
Operating Cash Flow 210,000 216,300 222,789 229,473 236,357 243,448 250,751 258,274 266,022 274,002 282,222 290,689 299,410 308,392 317,644
Total Cash Flow
NPV
IRR

Prob. 3 PAN Airways financials

Actual Projected
Income Statement (in '000 $) 2020 2021 2022 2023 2024 2025 Notes
Operating Revenue growth rate 4.0% 3.8% 3.5% 3.0% 3.0%
Total Operating Revenues 8,219
Wages, benefits, payroll support, incentives 2,211 Increase at a yearly rate of 3.0%
Aircraft fuel, incl. hedging gains/losses 1,790 Increase at a yearly rate of 5.0%
Aircraft maintenance/rent 565 Increase at a yearly rate of 2.0%
Landing fees and other rentals 437 Increase at a yearly rate of 2.0%
Depreciation/amortization 374 Increase at a yearly rate of 3.0%
All other expenses 1,300 Increase at a yearly rate of 4.0%
Total Operating Expenses 6,677
Operating Income 1,542
Total non-operating income/(expense) (475) Increase at a yearly rate of 2.0%
Income before taxes 1,067
Income tax expense/(benefit) 224
Net Income 843
Balance Sheet
Cash and investments 1,244 Increase at Operating Revenue growth rate
Accounts receivable 1,249
Inventory and supplies, net 645
Other 192
Current Assets 3,330
Other 2,811 Increase at Operating Revenue growth rate
Total Assets 6,141
Bank Loan 2,959 Plug to make balance sheet balance
Payables 248 Increase at Operating Revenue growth rate
CPLTD 44
Other 93
Current Liabilities 3,344
LTD 1,877 LTD of previous year minus CPLTD of current year
Equity 920 Equity of previous year plus net income of current year
Total Liabilities & Equity 6,141
Working Capital Exclude Bank Loan

Prob. 4 PAN Airways valuation

PAN Airways Cash Flow Valuation
(in '000 $) 2021 2022 2023 2024 2025 TV
Income before taxes
+ Interest
= Income before interest and taxes (EBIT)
EBIAT
- Change in Working Capital
- Change in Other assets
Free Cash Flow (FCF)
PV of FCF
- Existing Debt
= Value of equity

Prob. 5 JTM Balance Sheet

Actual Projected
Balance Sheet 2020 2021 2022 2023 Notes
Cash 240 250 250 250
Notes and Acc. Rec. 7,013 8,385 9,998 12,040
Inventory 5,588 6,630 7,905 9,520
Prepaid 192 195 232 280
Current Assets 13,033 15,460 18,385 22,090
Other 3,325 3,830 4,393 5,105
Total Assets 16,358 19,290 22,778 27,195
Bank Loan 600 656 657 680
Payables 3,057 3,705 4,417 5,320
CPLTD 433 450 450 450
Other 1,477 1,712 1,994 2,350
Current Liabilities 5,567 6,523 7,518 8,800
LTD 2,458 2,008 1,558 1,108
Equity 8,333 10,759 13,702 17,287
Total Liabilities & Equity 16,358 19,290 22,778 27,195
Ratios:
Bank Loan to Receivables 0.1 0.1 0.1 0.1
Liabilities / Equity 1.0 0.8 0.7 0.6
Debt / Equity 0.4 0.3 0.2 0.1

Prob. 5 Consolidated BS

Actual Projected
Balance Sheet
Cash
Notes and Acc. Rec.
Inventory
Prepaid
Current Assets
Other
Total Assets
Bank Loan
Payables
CPLTD
Other
Current Liabilities
LTD
Equity
Total Liabilities & Equity
Ratios:
Bank Loan to Receivables
Liabilities / Equity
Debt / Equity

v. JAN '22

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