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Question 2 USF Inc. reported EBITDA of $1,290 million currently prior to interest expenses of $215 million and depreciation charges of $400 million. Revenues were $13,500 million. Capital expenditures are currently $450 million and working capital was 7% of revenues. The firm had debt outstanding of $3,068 million (book value) trading at a market value of 3,200 million and yielding a pretax interest rate of 8%. There were 62 million shares outstanding with a current price of $64 per share, and the most recent beta was 1.10. The tax rate for the firm was 40%, Treasury bond rate is 7.00% and the equity risk premium is 5.5%. The expected revenues, earnings, capital expenditures, and depreciation to grow at 9.5% a year for the next five years, after which the growth rate was expected to drop to 4%. Capital spending will be 120% of depreciation in the steady state period. The company also planned to lower its debt/equity ratio to 50% for the stead state (which will result in the pretax interest rate dropping to 7.5%. What is the estimated value of the firm? (Check Figure: 9,683.93 million) What is the value of the equity of the firm? (Check Figure: 6,483.93 million) What is the price per share? (Check Figure: 104.58) Remember to unlever and re-lever Beta when the firm's capital structure changes. Question 2 USF Inc. reported EBITDA of $1,290 million currently prior to interest expenses of $215 million and depreciation charges of $400 million. Revenues were $13,500 million. Capital expenditures are currently $450 million and working capital was 7% of revenues. The firm had debt outstanding of $3,068 million (book value) trading at a market value of 3,200 million and yielding a pretax interest rate of 8%. There were 62 million shares outstanding with a current price of $64 per share, and the most recent beta was 1.10. The tax rate for the firm was 40%, Treasury bond rate is 7.00% and the equity risk premium is 5.5%. The expected revenues, earnings, capital expenditures, and depreciation to grow at 9.5% a year for the next five years, after which the growth rate was expected to drop to 4%. Capital spending will be 120% of depreciation in the steady state period. The company also planned to lower its debt/equity ratio to 50% for the stead state (which will result in the pretax interest rate dropping to 7.5%. What is the estimated value of the firm? (Check Figure: 9,683.93 million) What is the value of the equity of the firm? (Check Figure: 6,483.93 million) What is the price per share? (Check Figure: 104.58) Remember to unlever and re-lever Beta when the firm's capital structure changes

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