Walsh College Freddie Mac Federal Home Loan Mortgage Corporation Analysis

Calculations and Analysis to be performed:

a.

Calculate NOPAT for 2019 and 2020.

b.

Calculate Net Working Capital (NWC), Net Operating Working Capital (NOWC) and Total Operating Capital

("Operating Capital") for 2019 and 2020 (use three (3) different methods to calculate Operating Capital).

c.

Calculate Free Cash Flow (FCF) for 2020 using the change in gross fixed assets as a proxy for capital expenditures.

d.

Calculate ROA, ROE and ROIC for 2019 and 2020.

e.

Calculate Freddie's Capital Structure at the end of 2020 assuming the book values of the company's debt and

equity approximate their market values on those dates.

f.

Estimate Freddie's WACC at the end of 2020.

g.

Was Economic Value Added (EVA) during 2019 or 2020 (assume the WACC was the same in both years)

h.

Assuming Freddie's Free Cash Flows are projected to grow by 12.0%, 10.0%, 8.0% and 5.0% in the period 2021

through 2024, respectively, and that the firm's L-T sustainable annual growth rate will be 3.5% thereafter,

estimate Freddie's intrinsic value per share for its common stock at the end of 2020.

i.

Freddie's management has stated its desire to change the capital structure of the company at the end of 2020 by retiring

debt to lower the Debt Ratio to 40%. The company's investment banker has informed the company that lowering its debt

level will lower Freddie's pre-tax borrowing rate by at least 200 basis points. If Freddie implemented this proposed capital

structure at 12/31/20, how would the company's WACC change? What about its intrinsic value per share?

MAKE SURE YOU USE AT LEAST 4 DECIMAL PLACES IN ALL CALCULATIONS