Theta Therapeutics has the following information and projections. Use the FCFE model to calculate the intrinsic value of Theta's equity. $\begin{array}{l}
\begin{array} { l }
\ \
\text { EBIT (operating profit)}\
\text { Operating assets}\
\text { Operating liabilities}\
\text { Total Debt}\
\text { Tax rate}\
\text { Interest rate on debt}\
\text { long-term growth rate}\
\text { Required return on equity}\
\end{array}
\begin{array} { l }
\text { Cunent }\
\text { Year } && \text { Year 1 } & \text { Year 2 } & \text { Year } 3 \
&\text { NA } & 1,000 & 1,100 & 1,200 \
&1,200 & 1,300 & 1,500 & 1,600 \
&300 & 300 & 400 & 500 \
&1,000 & 900 & 1,100 & 1,200 \
&\text { NA } & 25 \% & 25 \% & 25 \% \
&\text { NA } & 6 \% & 6 \% & 6 \%\
4\%\
9\%
\end{array}
\end{array}$

Question

Theta Therapeutics has the following information and projections. Use the FCFE model to calculate the intrinsic value of Theta's equity. $\begin{array}{l}
\begin{array} { l } 
\ \
\text { EBIT (operating profit)}\
\text { Operating assets}\
\text { Operating liabilities}\
\text { Total Debt}\
\text { Tax rate}\
\text { Interest rate on debt}\
\text { long-term growth rate}\
\text { Required return on equity}\
\end{array}
\begin{array} { l } 
\text { Cunent }\
\text { Year } && \text { Year 1 } & \text { Year 2 } & \text { Year } 3 \
&\text { NA } & 1,000 & 1,100 & 1,200 \
&1,200 & 1,300 & 1,500 & 1,600 \
&300 & 300 & 400 & 500 \
&1,000 & 900 & 1,100 & 1,200 \
&\text { NA } & 25 \% & 25 \% & 25 \% \
&\text { NA } & 6 \% & 6 \% & 6 \%\
4\%\
9\%
\end{array}
\end{array}$

Quizplus · Accepted Answer

$\begin{array}{l}
\begin{array} { l } 
\
\text { NOPAT}\
\
\text { TOC}\
\text { Investment in } \mathrm{TOC} \
\
\text { FCF}\
\
\text { After-tax interest}\
\text { Change in debt}\
\
\text { FCFE}\
\text { HVFCFE}\
\end{array}
\begin{array} { l } 
\text { Curent Year }\
\ \
900.0
\ \ \ \ \ \ \ \ \
\end{array}
\begin{array} { l } 
\text { Year 1 } & \text { Year } 2 \
750.0 & 825.0 \
\
1,000.0 & 1,100.0 \
100.0 & 100.0 \
\
650.0 & 725.0 \
\
40.5 & 49.5 \
(100.0) & 200.0 \
\
509.5 & 875.5
\end{array}
\begin{array} { l } 
\text { Year } 3 \
900.0 =\text { EBIT }(1 \text { - T) }\
=\text { Operating assets - } \
1,100.0  \text { operating liabilities } \
-=\text { Change in TOC } \
=\text { NOPAT - investment in } \
900.0 \text { TOC } \
=\text { Debt } x \text { interest rate } \mathrm{x}(1\
54.0 -\text { T) } \
100.0 =\text { increase in debt } \
=\mathrm{FCF}-\text { a-t interest }+\
946.0 =\text { increase in debt }\
19,676.8 =\text { FCFE } 3 \mathrm{x}(1+g) /(r-g)
\end{array}
\end{array}$
 
 $ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ =\mathrm{PV} $ of $ \mathrm{FCFE} $ and
$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$ \mathrm{HVFCFE} $  $\text { at require }$ 
$\text { VFCFE }$ $ \quad $$ \quad $ $17,128.9$ $ \quad $$ \quad $ $\text { return on equity}$

Theta Therapeutics Has the Following Information and Projections A) $14,156 B) $15,572 C) $17,129 D) $18,842 E) $20,726

Theta Therapeutics Has the Following Information and Projections A) $14,156
B) $15,572
C) $17,129
D) $18,842
E) $20,726