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Cash Flow Calculation

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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.