QUIZ 3 Consider the following data for ABC enterprises (all numbers in €): · Today is January 1, 2013 · Income statement for 2012 shows: o Revenues for 500,000 o Cost of Goods sold: 350,000 o Selling, General & Administrative Costs: 25,000 · Applicable tax rate = 35% · Investment in working capital for 2013 is expected to amount to 20,000 and capex will be 40,000. · Depreciation that same year has been estimated at 15,000. · Evolution of the above magnitudes is expected to be the following: o Revenues are expected to grow at a rate of 5% until 2017 o Cost of goods sold: 70% of revenues o G&A costs: 5% of revenues o Investment in working capital is expected to grow at a rate of 5% until 2017 o Both CAPEX and depreciation are expected to follow the same growth rates which are: 4% until 2015 and 2% the two years after that. With respect to the cost of capital, available data is the following: · The firm’s balance sheet shows 200,000 in financial debt which bears an annual interest rate of 5% and 500,000 in equity. · Industry’s average unlevered beta = 1.13 · Market risk premium = 7% · Government bond with 20 years´ maturity stands at 3% Please, forecast cashflows for 2013 – 2017, estimate the Residual Value and perform the corresponding firm valuation.
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