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Year 1 Year 2 Panel A - Projected Free Cash Flow

The document contains projected financial information for a company over two years including revenue, costs, operating income, taxes, depreciation, capital expenditures, and free cash flow. It also includes assumptions for a valuation model including revenue growth, tax rates, expense percentages, capital investment rates, and cost of capital. A net present value calculation is shown using a discount rate of 25.7% which results in a negative NPV, indicating the project should be rejected.

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Lede Ann Calipus Yap
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82 views7 pages

Year 1 Year 2 Panel A - Projected Free Cash Flow

The document contains projected financial information for a company over two years including revenue, costs, operating income, taxes, depreciation, capital expenditures, and free cash flow. It also includes assumptions for a valuation model including revenue growth, tax rates, expense percentages, capital investment rates, and cost of capital. A net present value calculation is shown using a discount rate of 25.7% which results in a negative NPV, indicating the project should be rejected.

Uploaded by

Lede Ann Calipus Yap
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
You are on page 1/ 7

12.

13

Year 1 Year 2
Panel A - Projected Free Cash Flow
Net Revenue $ 2,345 $ 2,931.3

Cost of sales (excluding depreciation) $ 914.6 $ 1,084.6


Selling, marketing, and administrative $ 1,172.5 $ 1,319.1
Depreciation $ 70.4 $ 117.3
Operating Income $ 187.6 $ 410.4
% of Sales 8.0% 14.0%

Taxes $ 66.8 $ 149.8


After Tax Operating Income $ 120.8 $ 260.6
% of Sales 5.2% 8.9%

Depreciation $ 70.4 $ 117.3


Working Capital Investment $ 187.6 $ 205.2
Capital Expenditures $ (117.3) $ (146.6)
Free Cash Flow $ 261.5 $ 436.5
% of Sales 11.2% 14.9%

Present Value $ 1,036.8 3-Year Total $ 227.4 $ 330.1

Year 1 Year 2
Panel B - Valuation Model Assumptions
Revenue $ 2,345
Revenue growth 25.00%
Tax rate 35.60% 36.50%
% of sales
Cost of sales (excluding depreciation) 39.00% 37.00%
Selling, marketing, and administrative 50.00% 45.00%
Expenses excluding depreciation 89.00% 82.00%
Operating margin before depreciation 11.00% 18.00%
Fixed capital investment 5.00% 5.00%
Depreciation (% of sales) 3.00% 4.00%
Net fixed investment 2.00% 1.00%
Working capital investment 8.00% 7.00%
Cost of capital 15.00%
Year 3 Year 4

$ 3,370.9

$ 1,179.8
$ 1,179.8
$ 168.5
$ 842.7
24.9%

$ 316.0
$ 526.7
15.6%

$ 168.5
$ 202.3
$ (168.5)
$ 729.0
21.6%

$ 479.3

Year 3 Year 4

15.00%
37.50%

35.00%
35.00%
70.00% 0.00%
30.00% 0.00%
5.00%
5.00%
0.00% 0.00%
6.00%
C. D. E.
PVAr,=((0)
0= 3/ / (1 + K)3 Explicit Period
(1+))/(())
Terminal Value
Enterprise Value
0= 729/0.15 / (1 +
PVAr,=(261.5 0.15)3
(1+0))/
((0.150)) V0 =( 4860
PVAr,=(261.5 )/1.5208
)/0.15 V0 =$3,195.5
"PVAr",=$1,743.3

F.
0= 3/ / (1 + K)3 Explicit Period
B. Terminal Value
Enterprise Value
PVAr,=((0) 0= 729/0.20 / (1 +
(1+))/(()) 0.20)3

PVAr,=(729 V0
(1+0.03))/ =( 3,645 )/
1.728
((0.150.03)) V0 =$2,109.4
PVAr,=(750.87
)/0.12
"PVAr",=$6,257.25
xplicit Period $ 1,036.8
erminal Value 3,195.5
Enterprise Value $ 4,232.3

xplicit Period $ 1,036.8


erminal Value 2,109.4
Enterprise Value $ 3,146.2
Formula:

WACC=/ * Re + /Rd(1Tc)

Where:
Re = Cost of equity
Rd = Cost of debt
E = market value of the firm's equity
D = market value of the firm's debt
V = E+D = total market value of the firm's financing (equity and debt)
E/V = percentage of financing that is equity
D/V = percentage of financing that is debt
Tc = corporate tax rate

Formula:

WACC=/ * Re + /Rd(1Tc)

Answer:
WACC=.14/.22 * .084 + .
08/.22.048(1.40)
WACC=0.640.084+3.640.048(0.6)

WACC=0.053+0.17(0.6)

WACC=0.155+0.102

WACC=0.257 25.7%
WACC=0.257 25.7%

NPV

NPV=$315,000/(1+0.257)1 + $315,000/(1+0.257)2+$315,000/(
$315,000/(1+0.257)4 + $315,000/(1+0.257)5 + $315,000/(1+0.2
(1+0.257)7
NPV=250,596.66+199,360.91+158,600.56+126,173.88
+ 100,376.99 + 79,854.41 + 63,527.77

NPV=$978,491.181,400,000.00

NPV= -421,508.82

NCF0 = initial cash outlay


NCFt = net cash flow
n = number of years
k = required rate of return
7)2+$315,000/(1+0.257)3 +
315,000/(1+0.257)6 + $315,000/

173.88
7

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