ABC Corporation Ltd. is planning to value a firm on the basis of DCF valuation technique....
ABC Corporation Ltd. is planning to value a firm on the basis of DCF valuation technique. Perform Valuation using below inputs.
| Year | 2019 | 2020 | 2021 | 2022 |
| Growth Rate | 8% | 15% | 15% | 10% |
| EBIT (1-t) | 300 | 320 | 340 | 230.20 |
| Capex | 100 | 120 | 130 | 50 |
| Cost of Equity | 13% | 13% | 13% | 13% |
| Cost of Debt | 8% | 8% | 8% | 8% |
| Debt Ratio | 25 | 25 | 25 | 25 |
| Return on Capital | 30 | 30 | 30 | 20 |
Homework Answers
| VALUATION ON BASIS OF DISCOUNTED CASH FLOW | |||||
| Cash flow Statement | 2019 | 2020 | 2021 | 2022 |
Annual Sustainable Cash Flow for Perpetuity |
| cash flow from Operating Activities | |||||
| EBIT | 300 | 320 | 340 | 230 | 8,441 |
| Change in Capex | -100 | -120 | -130 | -50 | |
| Change in Non Current Liabilities | |||||
| Change inOther Non Current Assets (L&A and Security Deposits) | 0 | ||||
| Received From PE | |||||
| Change in Cash Flows | 200 | 200 | 210 | 180 | 8441 |
| Free Cash Flow to Equity | 200 | 200 | 210 | 180 | 8441 |
| Discounting Factor | 1.00 | 0.88 | 0.78 | 0.69 | 0.61 |
| Discounted Cash Flow | 200 | 177 | 164 | 125 | 5177 |
| Sum of Discounted Cash Flow | 5,843 | ||||
| Add Book Value of Non Current Investments | |||||
| Add Cash & Bank Balance | |||||
| Less: Long Term Borrowings | |||||
| Equity Value | 5,843 | ||||
| 13.00% | |||||
| Discounting period | - | 1 | 2 | 3 | 4 |
| Discount rate calculator | 1.00 | 0.88 | 0.78 | 0.69 | 0.61 |
| Assumptions: | |||||
| Discounting Rate | 13.00% | ||||
| Terminal Growth rate | 10% | ||||
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ABC Corporation Ltd. is planning to value a firm on the basis of
DCF valuation technique....
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3. Company
Valuation
Fley Airline Supply is
trading at $15/share but you think that price may not be right. You
have the following data and you want to use it to calculate its
share price:
Gross Sales -
$124M
Annual Sales growth rate - 3.0%
COGS - 54% of
sales
Advert., Promotion & Selling - $5M
General & Admin -
$3.5M
Yearly inflation for non-COGS expenses - 3.3%
Tax rate -
21% Discount rate -
8% Cash balance -
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