The Ford Motor Company (Ticker: F) had Net Income of $2979.8 million in 2021. Currently F has capital expenditures (CAPX) equal to $5742 million, operating working capital of $5160 million (equal to the 2020 level), and depreciation of $5742 million. Interest costs in 2021 were $12,420 million. F has a cost of equity of 15% and a cost of debt of 9%, moreover, their capital structure is 66.6667% debt and 33.3333% equity. The tax rate is 21%. Ford currently has 4 billion shares trading at $17.25/shr and $138 billion of LT debt rated BB. The consensus of analysts' forecasts project Ford's FCFF to grow at 7.6% for the next 2 years before settling into a steady state with growth of 2.8% per year forever. (a) Estimate a value for F at the end of 2021 based on the consensus forecast. Use the WACC approach. (b) As an analyst for the Extremely Cool Investment Corp (ECIC) your view differs from the consensus. Specifically, though you agree with the consensus of 7.6% growth in FCFF in the near term, you expect terminal value (TV) of 13X terminal (2023) cash flow. Would you issue a buy, sell, or hold recommendation to portfolio managers at ECIC? Explain. Your explanation must utilize another valuation based on the TV multiplier. (C) Assuming that F intends to maintain its Debt-to-Value (D/V) ratio at 2/3, re-work your valuation of F from Part (a) using the Adjusted Present Value (APV) approach, and explain why your valuation does or doesn't match your WACC valuation in Part (a). Note: you need to do another valuation. (d) Sticking with the auto industry but shifting gears (pun intended), the Really Cool Car Company (RCC) is a relatively new entrant in the electric vehicle (EV) industry hoping to eventually compete successfully with Tesla (TSLA), NIO, and Lucid (LCID). It is now the end of 2021 and RCC is in need of a round of VC capital. RCC'S team is forecasting sales 2 years hence (2023) of $25,000,000, at which point they hope to go public. NIO and LCID are thought to be the best comparables in terms of business risk and growth opportunities. NIO and LCID are both all-equity financed and trading at 14% sales and 12% sales, respectively. RCC approaches Very Cool Ventures (VCV) about investing $10,000,000 for 1,000,000 shares. There are currently 9,000,000 shares of RCC outstanding. Should VCV be willing to invest $10,000,000 for 1,000,000 shares if they require a return of 60% and also anticipate further dilution of 25% in additional VC funding and another 8% sold at the IPO? What is the minimum number of shares they should accept in exchange for $10,000,000? (Note: make sure you justify your answers) Note: the 1,000,000 shares VCV is considering buying will be newly-issued shares (e) VCV agrees to the proposed valuation, but only after insisting that each share includes 0.25 warrants, struck at $12, and expiring in 2 years. Given NIO's volatility of 60% and LCID's volatility of 112%, use 86% annual volatility and annual timesteps to evaluate these warrants. If the risk-free rate is 2%, how much is one share and 44 of a warrant worth if the share price is $10? Show that VCV is effectively paying $9.13/shr, if paying $10 for 1 share plus 14 of a warrant. Based on your answer to Part (d), does it make sense that VCV went for this deal? Please justify your answer with the appropriate valuation. 10.00 (1) Now RCC is considering an alternative to the VCV funding and subsequent IPO: selling themselves to a SPAC, the Super Cool Acquisition Corp (SCAC). SCAC had previously raised $80 million in an IPO by selling 8,000,000 shares at $10 each. The sponsor's promote stake is 2,000,000 shares. RCC is insisting that SCAC'S sponsor tie their promote stake to an earnout (EO). Specifically, the way the EO works is that the sponsor will only be entitled to receive the promote shares if after 2 years RCC's share price exceeds $15, otherwise the EO expires worthless. Assuming a $10 share price for RCC, if the sponsor agrees to subject the promote shares to an EO clause, how much value will the sponsor be sacrificing compared to simply receiving the shares outright without contingency? Note: assume the same volatility for RCC as in Part(e). t=0 t=1 t=2

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