Project Contemporary issues in Financial Management : Monte Carlo, Sensitivity panel

Résumé du document

Projet excel Complet finance Master 2 avec WACC, Monte Carlo Analysis, Risk premium, Defaults Spreads & ratios, inputs et Optimal capital structure.

Extraits

[...] We estimate the unlevered firm value first and secondly estimate the present value of tax benefits at different levels of debt. Current Value of Nexity = 3.12B + 430 million € = 3.55B - Tax Benefit on Current Debt = 430 million * 0.317 = 136.31 million + Expected Bankruptcy costs = 0.66 * (0.15 * 3.55B) = 35.145 million € Unlevered Value of firm = 3.448 B € Probability of bankruptcy = 0.66, based on Nexity current rating. Report 3 – Dividend Policy of the total mark for the final project) 498 words Nexity this year paid a dividend of € 2 per share for the year 2020, therefore going from € 2.5 to € 2 between 2019 and 2020 (as you can see on annex due in particular to the exceptional period of the covid which strongly affected sales by Nexity. [...]

[...] As we can see, a variation of to + 10% seems to impact in the same way the sensitivity of the units or the variables costs. We can also see that even a variation of in terms of units can have a major impact on the final NPV (going from € 35 million to € 27 million for a variation of Among the assumptions to be taken into account there are: 1. Considering the 22,000m² construction site, I decided that it would be wise to set the price at 950,000 € with a projection of 100 units sold. [...]

[...] Even though debt can have tax benefit, it can also create a loss of flexibility because we cannot draw on it in the future that's why among the firm which exist in the world, those who have access to capital markets should be more willing to borrow more today. With a in term of Bond ratings, the confidence in borrowing is relatively high. Regarding the trade-off of debt, the benefits should be high in Nexity thanks to investment projects for the next few years. [...]

[...] Based to the fact that for next few years the net income will be high than the past, the firm will pay more in dividends and will have to issue new equity to fund projects so it will reduce expected price appreciation on the stock. Nexity continue to pay dividends in order to satisfy investors of the company but mainly for a signaling position. The competition in real estate sector is really hard so Nexity send signals to the market that they have good cash flow prospects in the future. The dividend payout of Nexity is 28% so it is reasonably low payout ratio and Nexity dividend payments are well covered by earning. [...]

[...] The beta for Nexity's stock in October 2021 was 1.4102. The T. bond rate at that time was 1.75%. Using an estimate equity risk premium of 6.92% we estimated the cost of equity for Nexity to be: Cost of equity = 1.75% + 1.4102(6.92%) = 11.51% Nexity bond rating is estimated as a level and based on this rating, we estimated pretax cost of debt for Nexity of 3.75%. The marginal tax rate is 33.33% so the after-tax cost of debt for Nexity is: After Tax Cost of Debt = 3.75% – 0.3333) = 2.5% Based to these parameters, WACC = 5.837% Maximum Tax Benefit = EBIT * Marginal Tax Rate = 82.791 million Would you recommend to the firm to move to the optimal? [...]